Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — TRADE AND INDUSTRY

North East Shipbuilders Ltd.

Mr. Clay: To ask the Chancellor of the Duchy of Lancaster whether he has recently met the chairman of British Shipbuilders to discuss North East Shipbuilders Ltd.; and if he will make a statement.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke): I last saw John Lister on Thursday 7 July. North East Shipbuilders was among the subjects that we discussed.

Mr. Clay: The Minister will be aware that hundreds of lay-offs are to take place in the next few weeks because of the situation at NESL. Does he agree with Mr. Lister, the chairman, that the immediate hope for the yard is the Cuban order? If so, will he immediately give the intervention fund subsidy and suitable credit arrangements, rather than insist on privatisation first? The Minister's insistence and ideological obsession over privatisation are causing uncertainty and delay and could lose the one order that could save the yard. Will he now agree to the intervention fund and let us clinch the Cuban order? We can talk about privatisation and takeover later.

Mr. Clarke: Negotiations are continuing on the Danish contract, but I accept that, because of the unfortunate situation, substantial lay-offs appear to be forthcoming in Sunderland and are likely to take place over the next few weeks.
We do not yet know how much the Cubans would pay for any ships that they bought and we cannot say whether the Cuban order would be likely to occupy all the yards in Sunderland. I made it clear that we would give intervention fund support at an acceptable cost to the taxpayer, but we are not in a position to do that at the moment. It is likely that the proposition will be attractive only if we can find a suitable private sector purchaser.

Mr. Charles Wardle: Has not the nationalised shipbuilding industry lost well over £1 billion over the last decade? Is it not also a fact that the industry's decline in this country from controlling over one third of the world market to controlling just a paltry 1·5 per cent. has been due to excessively high wage demands, thus pricing British shipbuilding out of the world market? Is there not also huge over-capacity in the industry?

Mr. Clarke: The decline has been due to a combination of features, including the last point made by my hon. Friend. There is a vast excess of shipbuilding capacity throughout the world, compared with any likely demand for ships from purchasers. For a variety of reasons, British Shipbuilders has made heavy losses, well above the intervention fund support that European rules allow us to give it. It would be reckless for contracts to be placed in yards on unacceptable terms to the taxpayer, with the likelihood that the British taxpayer would pay more than the Cuban for the resulting ships.

Mr. Beith: Does the Minister realise that the industry has been hugely slimmed down and that what remains of shipbuilding skills on the Wear and the Tyne is of great potential importance to this country? It would be industrial vandalism if the Minister did not safeguard the industry's future either in this case—as he does not appear to be doing sufficiently—or in the case of the Tyne, after the order announced on Monday.

Mr. Clarke: Some shipbuilding is doing extremely well. The order won by Yarrow earlier this week was very good news on Clydeside. The shipbuilding industry is slimmed down, as it is in the rest of western Europe and the far east. The yards that will survive are those that have realistic prospects of continuing to find customers at an acceptable cost to the taxpayer. The taxpayer has proved his willingness to put money into British Shipbuilders when there is a worthwhile proposition to pursue.

Mr. Gould: Is the Minister aware that if, for reasons of dogma and because the yard is in public ownership, he refuses to provide intervention fund assistance and, as a consequence, the Cuban order is lost and the yard has to close, he will not be forgiven for that act of vandalism? Would it not make sense to secure the order first and then decide the question of ownership, if the Government's obsession with privatisation dictates that that is a real question? May we have an assurance from the Minister that the House will have an opportunity to call him to account for his part in this quite unnecessary drama before the House rises for the summer recess?

Mr. Clarke: The Cubans have not yet placed an order and no price has been negotiated with them for those ships. If the Cuban order were obtained, it would not occupy the whole yard at Sunderland. My reservations about the prospects for the Cuban order are based, not on dogma, but on the fact that the last time British Shipbuilders built ships for Cuba it lost between 12 and 17 per cent. on the cost over and above the intervention fund support that we then gave for that order. I know that the Labour Government went in for a notorious Polish ship deal shortly before the 1979 election. The Government have poured money into British Shipbuilders, but we must do so on a common sense basis when we know what the cost is likely to be.

North-West

Mr. Butler: To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the role and extent of foreign investment in the economy of the north-west.

The Parliamentary Under-Secretary of State for Industry (Mr. Robert Atkins): There are over 600 overseas


owned firms operating in the north-west, making a major contribution to the region's employment and output. In addition, as elsewhere in the United Kingdom, new inward investment brings wider benefits through innovation in products, technologies and management practices, as well as generating additional demand for local sub-contractors and component suppliers.

Mr. Butler: With 75 American companies in Warrington-Runcorn alone, does that not provide much-needed employment and wealth in the north-west, and should that not be encouraged rather than narrow mindedly dismissed?

Mr. Atkins: My hon. Friend is, as ever, right in drawing attention to the fact that the north-west is a success story. In particular, Warrington-Runcorn in his constituency is the jewel in that success story. I congratulate him on the work that he has done to encourage further investment in that area.

Mr. James Lamond: If the Minister is so keen on inward investment, why does he not give a little more encouragement to initiatives such as that taken by Oldham metropolitan borough council, which is organising a trade mission to China, but which has received little support from the Government despite the desperate need to bring investment and jobs to the area?

Mr. Atkins: As a senior and distinguished Opposition Member, the hon. Gentleman will know that the organisation called INWARD is well involved in encouraging inward investment in Britain. It is not difficult to go to China to encourage inward investment. Preston borough council, which is also Labour-controlled, recently sent a delegation to do just that. If the hon. Gentleman has particular difficulties in relation to Oldham with which I am not immediately familiar, and he cares to write to me, I shall be more than happy to look into the possibilities to which he draws attention.

Mr. Burt: My hon. Friend will be aware that foreign investment brings greater employment. He may also be aware that unemployment in my constituency is now down to about 7·5 per cent. Does he agree that if Opposition Members truly wish to encourage more enterprise and jobs in the north-west they should concentrate on talking about the positive aspects of the north-west, instead of the negative, which they so often portray?

Mr. Atkins: My hon. Friend is right. The north-west is booming at the moment. Hon. Members on both sides of the House have plenty of examples to demonstrate that fact. If the Opposition drew the same attention to it as do my hon. Friend and many of my other hon. Friends from the north-west, the virtues and strengths of the north-west could provide an even better future.

Mr. Alton: Is not a properly trained and skilled work force one of the keys to attracting more inward investment to the north-west? Therefore, does the Minister agree that it will be disadvantageous to our prospects of attracting new industry if the employment training initiatives are turned away by some local authorities in the north-west, particularly Liverpool, where some £30 million-worth of Government funds and some 16,000 employment training places are at risk as a result of the turning away of training opportunities?

Mr. Atkins: The hon. Gentleman makes an excellent point in his own way. I do not have particular responsibility for the training initiative, but the hon. Gentleman is right. I and many other Members of Parliament from the north-west think that the work force there is one of the best and most flexible in Britain. Given the right training, management and encouragement, it can do anything that it sets out to achieve.

Post Office Counters

Mr. Jim Marshall: To ask the Chancellor of the Duchy of Lancaster when he expects to respond to the Monopolies and Mergers Commission's report on Post Office Counters.

Mr. Kenneth Clarke: The Post Office will be producing an initial response to the findings of the Monopolies and Mergers Commission within three to four months of the date of publication of the report. I will then consider that response and report to the House.

Mr. Marshall: Does the Chancellor accept that there is wide scope for the expansion of services at Post Office Counters within existing services and in the provision of new facilities? Why does he not welcome such initiative and enterprise by the public sector, as he would undoubtedly do if the same enterprise and initiative were being shown by the private sector?

Mr. Clarke: I hope to have a further discussion with the chairman of the Post Office and some of his colleagues about that very subject this afternoon if other matters do not intervene and delay the meeting. We accept that it is right for the management of counters to take a more commercial approach and look for other activities which may be brought into the Counters business. We must ensure that the result will be fair competition with other private sector competitors and that we are not needlessly extending the Post Office, with its cross subsidy, into areas where that is not necessary.

Mr. Key: As my right hon. and learned Friend will no doubt be aware, there is considerable concern in rural areas about Post Office Counters management of rural sub-post offices. Does he agree that the only way to ensure that sub-post offices continue to exist is for people to use those sub-post offices and the village shop usually associated with them? Will he also agree that it would be helpful if new initiatives could be taken, like that at Laverstock near Salisbury, where the local pub has taken on the business of the sub-post office?

Mr. Clarke: The Government are entirely committed to the maintenance of the sub-post office network in rural areas. I have a rural constituency and I agree that it is right to remind the residents of villages that they should use the local post office and associated store if they want it to remain. We are constantly on the lookout for imaginative ways in which to strengthen the rural sub-post office network. Anything that increases the prospect of the network's survival will be welcome.

Mr. Skinner: Is the Chancellor of the Duchy aware that many years ago the Prime Minister used to work in a little shop in Grantham in which cross-subsidisation used to take place? That shop was owned by Alderman Roberts, who did not believe in Sunday trading—

Mr. Speaker: Order. But was it a post office?

Mr. Skinner: Yes. In the corner of that little entrepreneurial outfit there was a post office. In those days the Prime Minister, along with her father, used to believe in the public sector and milked it if necessary.

Mr. Clarke: The hon. Gentleman has studied the biography of my right hon. Friend the Prime Minister more closely than I have. Off the cuff I am not sure whether Alderman Roberts ran a sub-post office. I know that my right hon. Friend the Prime Minister, together with other members of the Government, is committed to the maintenance of the sub-post office network. We are encouraging the Post Office to take a more commercial view of the management of the network, which will enhance the prospects and future of all the offices.

Dame Elaine Kellett-Bowman: Does my right hon. and learned Friend agree that the Post Office's insistence that a rural post office should be a full mile from another post office can be unduly restrictive and cause hardship? For example, at Cabus in my constituency the only suitable premises, a newsagents, is 0·8 of a mile from the nearest post office, but many elderly people must struggle a long distance to get to the existing post office. Will he consider bringing the problem of the mile restriction to the attention of those who run the counter services?

Mr. Clarke: Depending on events, I might have the opportunity to raise that matter with the chairman of the Post Office this afternoon. It is a matter for him. I am sure that he will take steps to ensure that sensible rules are applied which improve the prospect of survival of rural post offices and their continued contribution to the network.

Mr. Stott: The Chancellor of the Duchy will be aware that among the largest customers of the Post Office counter services are the 2 million people with individual Girobank accounts. In addition, Girobank has large corporate accounts which also use the post office counters. Recipients of DHSS pay and unemployment benefit also use the counters. Will the right hon. Gentleman give an absolute guarantee that whoever buys Girobank when it is privatised will honour the five-year contract that the Post Office board has negotiated with Girobank for the continued use of Post Office Counters?

Mr. Clarke: Yes, I will. Any purchaser will be bound by the contract that has been freely negotiated between the Counters business and Girobank.

Sir Anthony Grant: When my right hon. and learned Friend meets the chairman of the Post Office, will he raise the subject of security for the people who work in sub-post offices, who are at risk from criminal assaults? In my constituency there have been the most appalling attacks on sub-post offices in the rural areas, one of which involved a Most horrific murder.

Mr. Clarke: Again, I will undertake to raise that point with the chairman. That is a serious problem for the Post Office, because sometimes substantial sums of cash are handled in quite remote rural areas and the Post Office must help sub-postmasters to protect themselves against risk.

Manufactured Goods

Mr. Canavan: To ask the Chancellor of the Duchy of Lancaster what is the latest balance of trade in manufactured goods.

Mr. Allen: To ask the Chancellor of the Duchy of Lancaster what is the cumulative trade deficit in manufactures so far in 1988.

The Minister for Trade (Mr. Alan Clark): In the five months ended May, there was an estimated deficit on trade in manufactures of £5·2 billion.

Mr. Canavan: What excuse does the Minister have this month for the ever-worsening deficit in manufactures and the worst-ever deficit in overall trade? As the official Budget forecast of a £4 billion overall trade deficit by the end of this year has already been exceeded, is it not about time the Government gave us a revised estimate, or are they too ashamed to admit that their's is the most deplorable record of any Government in history?

Mr. Clark: My right hon. Friend the Chancellor of the Exchequer has stated that he will issue a revised estimate. Over 70 per cent. of the deficit is accounted for by increased consumer spending. That is a function of high earnings and a raised standard of living. We know that the Labour party objects to that and that it lost the last three general elections.

Mr. Allen: The Minister will be aware that his manufacturing industry policies have decimated manufacturing in Nottingham, North. There have been job losses at Plessey, Boots, Raleigh, Players, and the closure of Thorn EMI and three neighbouring pits. Are they what the Minister would call the problems of success? When will unemployment in my constituency of Nottingham, North be reduced to 1979 levels?

Mr. Clark: The decimation of manufacturing industry is a pure myth. Since 1981 our share of world trade has remained absolutely constant, and world trade continues to expand.

Mr. Roger King: Does my hon. Friend agree that British manufacturing has never been in a finer state? The magnificent order that British Aerospace won with Saudi Arabia, for a huge sum in the region of £15 billion, is further evidence that we are producing the finest products at the right price to do the job that people want.

Mr. Clark: My hon. Friend is entirely right. Further testimony to the vigour of British manufacturing industry is offered by the readiness of foreign private sector capital to come here and start manufacturing operations. That point was made by my right hon. Friend the Prime Minister to the Leader of the Opposition only last week, just before he ran away to Africa for a fortnight's holiday.

Mr. Beaumont-Dark: Does my hon. Friend accept that it is undoubtedly true that British manufacturing industry is now doing better at home than it has done for many a long year? However, companies such as British Aerospace, Jaguar, Plessey and many others are finding their margins being squeezed because of the high rate of the pound. We must not go back to the days when we thought that a high pound was good for the country. We need a competitive pound, so that industry can export and compete with foreign manufacturers.

Mr. Clark: I do not know what my hon. Friend means by "competitive pound". The only solution that the Labour party has ever offered to that synthetic problem is continuously to depreciate the exchange rate. The most successful exporting countries are those that have the strongest exchange rates.

Mr. Austin Mitchell: What will the £5·2 billion deficit be at an annualised rate? What will be the consequences for British manufacturing industry of the massive deflation that is now beginning?

Mr. Clark: I have already told the House that my right hon. Friend the Chancellor of the Exchequer will issue a new forecast. Why does the hon. Gentleman not have the honesty to recommend to the House the Socialist solution to the gap, which is the return of exchange controls and import controls, with all that they mean for confidence in investment and consumer choice?

COCOM Control List

Mr. Atkinson: To ask the Chancellor of the Duchy of Lancaster if he plans any new initiatives to reduce and simplify the COCOM control list.

Mr. Alan Clark: Senior officials from COCOM member countries met last January and agreed steps to streamline control lists and improve the general effectiveness of COCOM. Work on the implementation of those steps continues.

Mr. Atkinson: Is my hon. Friend aware of the dramatic increase in American high technology exports to the Soviet bloc? Does he accept, from the evidence that I recently sent him of the experience of my constituent, Mr. Andrew Kuzan, who is now in an American gaol, that United States customs officials are not adverse to setting up and entrapping British exporters of equipment that is now obsolete but which remains on the COCOM list? Will he raise that matter with his American COCOM colleagues as soon as possible?

Mr. Clark: The particular case that my hon. Friend raises is still under investigation. I agree with him that there are elements within it that seem unsatisfactory. However, as both he and the House know, because I have said this before, the Government are anxious to reduce the scope and impact of the COCOM list. We have introduced a rolling review whereby one half of the list is examined in two parts every year, and we have had some success in deleting certain items from it.

Mr. Dalyell: Which are the "unsatisfactory" elements?

Mr. Clark: One must always be on one's guard that an international agreement is not manipulated by interested parties to gain commercial advantage at the expense of other parties who are more scrupulous in their observation of it.

Mr. Hind: Does my hon. Friend agree—[HON. MEMBERS: "Reading."] I am not reading. Does my hon. Friend agree that when exporting electronic goods to the Soviet Union, and importing them from the Soviet Union into Europe, we must safeguard against dumping of such goods by the Soviet Union? One lesson to be learnt by

British and European manufacturers is that they should make full use of the European Court to prevent such dumping.

Mr. Clark: There is something in what my hon. Friend says, but the question of dumping is entirely separate from strategic considerations affecting items included on the COCOM list and their export.

Regional Industrial Activity

Mr. Murphy: To ask the Chancellor of the Duchy of Lancaster if he has any plans to introduce new measures to increase industrial activity in Britain's regions.

Mr. Kenneth Clarke: My Department's enterprise initiative, launched earlier this year, is specifically designed to encourage enterprise and economic growth in all parts of the country.

Mr. Murphy: Bearing in mind that we now have the lowest and least generous industrial regional incentives for many years, with the completion of the Channel tunnel and the introduction of the single European market in 1992, will not south-east England become even more congested and overheated at the expense of other regions?

Mr. Clarke: Too many people in the regions place excessive emphasis on automatic subsidies to capital investment as an instrument of regional policy. We have abandoned the automatic regional development grant and are making very good use of selective regional assistance in order to encourage firms that would not otherwise become involved. In south Wales, the Valleys initiative of my right hon. Friend the Secretary of State for Wales is giving a further boost to development there. South Wales is one of the parts of the United Kingdom that are reviving most strongly, with a very encouraging level of investment, many new jobs and steadily declining unemployment.

Mr. Batiste: Does my right hon. and learned Friend agree that one of the most effective ways of encouraging regional industrial development is by improving the transport infrastructure available to industry? Does he further agree that the biggest boost he can give west Yorkshire industry at the moment is to support the creation of a freight depot at Stourton and rapid transit from it, through the Channel tunnel, into Europe?

Mr. Clarke: I shall certainly draw that point to the attention of my right hon. Friend the Secretary of State for Transport, because I agree that the right transport infrastructure is essential. One thing that has happened is that northern England's economy has revived so rapidly that all of us can see the result of that in traffic congestion. There is a great demand for more railway freight services, and we must rapidly respond to it.

Dr. Reid: Do not the Scottish steelworks make a major contribution to industrial activity? I put to the Minster the point that I made yesterday. The House has been misled by discrepancies in statements made by the Minister and by Sir Robert Scholey. Will the Minister take the opportunity today to make sure that the House is no longer misled, and will he confirm or deny Sir Robert's assertion that, some time ago, the Government were advised by him of the "probability"—I use Sir Robert's word—of the closure of


the hot strip mill at Ravenscraig? If that information was given to the Minister, why was it suppressed and not given to the House of Commons in the past few months?

Mr. Clarke: I have looked again at what I said in December, and at what Sir Robert Scholey said. I can see no inconsistency, and I do not understand what all the fuss is about in Scotland. In December I gave the House the forecast of the British Steel Corporation that, subject to market conditions, there was a continuing need for steel to be made at Ravenscraig for at least the next seven years. I also told the House that there was a problem with hot strip mill capacity, and that I therefore could not say the same about the hot strip mill, but that it would certainly be required until the end of this year. After that, as I made clear, everything will depend on market conditions. It is for the chairman and management of BSC to make their judgments about those conditions. As far as I am aware, BSC has as yet made no plans about the hot strip mill, and I do not imagine that it will do so until it sees the state of the market next year.

Mr. Oppenheim: Surely the best new measure for the regions would be to alter the employment policy of the Transport and General Workers Union, which seems to put employment in the prosperous south-east above jobs for the unemployed in Dundee—although Opposition Members still seem keen to accept the union's sponsorship.

Mr. Clarke: I would acid to my hon. Friend's legitimate complaint the union's entirely irresponsible attitude towards the Government's employment training schemes for the unemployed. It seems only too anxious to frustrate the Government's concern to help the unemployed to obtain the new jobs that we are creating. I should have thought that it is only the union's role as a kingmaker in the Labour party that stops it being denounced by more people on that side.

Dr. Godman: Industrial activity in my region of Scotland would be enhanced if the Government responded sympathetically to the floating hotel project being negotiated by Scott Lithgow. What is the present state of the negotiations with the Department of Trade and Industry?

Mr. Clarke: I can add nothing to what the hon. Gentleman already knows. We have well-established rules applying to shipbuilding projects, under which intervention fund support is available to certain yards and always has been. We also insist that any Government support must be based on economic common sense and at a price acceptable to the taxpayer. As far as I am aware, no negotiations on the Scott Lithgow project have yet come to a head.

Mr. Sackville: Is my right hon. and learned Friend aware that the economic attractions of the north-west have never been greater, and that the massive investment in fibreglass making by Pittsburgh Plate Glass near Hindley Green is a good example of an American company realising that? Does he agree that the only thing likely to stop that favourable trend is the emergence of further loony Leftism among local councils?

Mr. Clarke: I am glad to say that my Department gave considerable help to Pittsburgh Plate Glass. I agree about the attractions of the north-west, where we find that the take-up of the new enterprise initiative is higher than

would be expected. In view of the number of eligible firms, there is a great deal of inward investment. We need to get rid of the last councils that remain hostile to this kind of investment and take foolish actions that discourage investors from coming in.

Mr. Salmond: Would the Minister care to address the impact of the dismemberment of Ravenscraig, on industrial activity? How can he argue that the continuing anti-Ravenscraig bias shown by Sir Robert Scholey is in any way compatible with his claim that Ravenscraig is somehow in genuine competition with other steel plants? Does the Minister really believe that, through privatisation, the Government can wash their hands of such a disgraceful betrayal?

Mr. Clarke: I can never understand why Scottish interests so often lead to descriptions such as "the dismemberment of Ravenscraig" when nothing of the kind has happened. In December I gave a careful assessment based on British Steel's own forecasts of its needs and of the market place. That made our position clear, and nothing has changed since then. We can say only that the future of the hot strip mill is guaranteed until the end of this year. Thereafter it must depend on the market place and on British Steel's need to provide hot strip products in the most cost-effective and competitive way.

Mr. Watts: Does my right hon. and learned Freind agree that the upward trend in imports of capital goods, which accounted for nearly all the deficit last month and which adds to our productive capacity, is the best way in which our industry can expand to meet the great demand that is currently being met by imports, and that it will spread industrial prosperity through the region?

Mr. Clarke: I agree with my hon. Friend. Much of the deficit to which my hon. Friend the Minister for Trade referred a moment ago is accounted for by imports of capital goods, which are part of industry's investment. Many consumer imports are attracted here by the growth of our market. There is nothing to worry about in that deficit, much of which is the inevitable result of the continued expansion of this country's economy. In the old days the trade deficit was based largely on public sector deficits, which is why they caused so much more concern than this deficit ought to cause now.

Mr. Caborn: Has the Chancellor of the Duchy of Lancaster had time to read the latest publication of the Institute of Civil Engineers, which deals with urban regeneration? If so, does he agree that, like many other reports from both academic and professional bodies, it suggests that there is now a real call for planning and regional co-ordination, something which this Government have not done?
As the Minister responsible for the inner cities and the regions, will the right hon. and learned Gentleman tell the House what lead is given by the Government in moving their Departments to the regions and encouraging research establishments to locate in the regions? So far as the regions are concerned, what input has the right hon. and learned Gentleman had in the work of the Monopolies and Mergers Commission, which has been of real concern to many in the north? Will he now deal with industrial regeneration and stop playing about with the cosmetics and with glossy pamphlets?

Mr. Clarke: There has not only been a great deal of co-ordination, but a great deal of decision-making and action in relation to urban regeneration. The hon. Gentleman could visit many of our major cities in which he would see the physical and other signs of the revivals that are taking place in our inner-city areas.
I agree that the costs of maintaining such a large Civil Service in London will inevitably lead to sensible decisions to relocate parts of the Government machine outside London. Indeed, that is being done and I expect the majority of my Department of Trade and Industry to be located outside London shortly, the major move being that of the Patent Office to Newport in south Wales. I know that other Departments are contemplating similar moves.
On the question of industrial activity, we have already described the way in which industrial investment is going to south Wales, the north-west and other parts of the country. The forecasts of the Confederation of British Industry for manufacturing investment in this country are extremely high and expect a growth of about 18 per cent. this year, with continued growth in investment into 1989.

Transport (Inner Cities)

Mr. Dickens: To ask the Chancellor of the Duchy of Lancaster what discussions he has held concerning transport in relation to inner city policy; and if he will make a statement.

Mr. Atkins: Inner city transport is, of course, a matter for my right hon. Friend the Secretary of State for Transport, but transport issues are raised from time to time in discussions I have with inner city business men.

Mr. Dickens: Will my hon. Friend concede that the infrastructure of the north-west is second to none in the United Kingdom and that, coupled with many other excellent qualities, that wonderful infrastructure is attracting inward investment to the north-west and to towns such as Oldham and Rochdale? Will he also concede that many companies—not only international companies, but many from the expensive south—are coming to the north-west, an area which historically has always produced the lion's share of the wealth of the United Kingdom?

Mr. Atkins: My hon. Friend makes his case perhaps better than I could. As a fellow north-west Member of Parliament, I can only agree exactly with what he has said. We have a superb infrastructure and there is every reason why not only the transport successes of the north-west but its many other successes will continue to attract many people to the north-west, which, as he rightly says, is the jewel in the crown of manufacturing in this country.

Mr. Morley: Does the Minister accept that transport of any kind is important for industrial development, and that in that sense the A1 and M1 can no longer cope with the desired capacity of traffic and there is a need to extend the M11 up to the north-east, across the Humber bridge? Does he also accept that it would help the development of the region to abolish estuary tolls in general, and those on the Humber bridge in particular?

Mr. Atkins: The matters that the hon. Gentleman raises are largely for my right hon. Friend the Secretary of State for Transport. We are in constant touch with our colleagues in that Department to make them aware of the

necessity for industry and commerce to use the roads to a greater extent. Obviously, the Department will have to examine the pressures on those roads in the normal course of events.

Airbus A320

Mr. Forth: To ask the Chancellor of the Duchy of Lancaster if he will give details of the manufacturing technology employed in the production of the Airbus A320.

Mr. Kenneth Clarke: The latest developments in materials and manufacturing technology are employed on Airbus production to achieve benefits in terms of costs, weight, strength and ease of manufacture.

Mr. Forth: I thank my right hon. and learned Friend for that helpful answer. Will he expand on it and tell the House whether he is satisfied that progress is being made on achieving more effective control over the manufacturing process of that product, given that it is spread over a number of different locations? Can he respond to the recent investigations into the production process of Airbus and give us some encouraging news about cost control and increased future competitiveness?

Mr. Clarke: Every time that I have attended an Airbus Ministers' meeting I have pressed the case for better management and financial control of the Airbus project. I believe that the four partner Governments and the four partner companies are broadly agreed. We have endorsed the report that we commissioned from the so-called four wise men—one leading industrialist from each of the four countries. We have another meeting in September, when I hope that the companies will report to us on progress and confirm that they intend to set up new and much better methods of running the project by 1 January next year.

Mr. Gerald Howarth: Does my right hon. and learned Friend agree that the fly-by-wire technology employed on the A320 is not only the most advanced in the world, and has contributed to the fact that that aircraft received the most advance orders of any civil aircraft since the war, but that it was British-inspired? Does he further agree that the decision of British Airways to put the A320 back into service shortly after the recent crash fully confirmed the technological safety of that system and that all passengers should be reassured that the technology is well proven, sound and tested?

Mr. Clarke: The A320 is certainly the market leader in its field. I agree that it has the most advanced technology of any of its competitors. The Airbus products are the next generation of aeroplanes, and some of its competitors are still producing face-lifted versions of older aeroplanes using older technology. We are awaiting the inspectors' report on the tragic French accident. I cannot possibly anticipate that, but I share my hon. Friend's confidence that it is likely to prove that the technology of the aircraft is as safe and spectactular as we believe it to be.

Mr. Dalyell: Could the curious among us be told what factors led the Minister to take the initiative in talking to the management about management control? Is that not rather unusual? It may be justified, but will he explain to the House why he did it?

Mr. Clarke: The Government do not believe that the best way to build a modern technological product is by having the management in the hands of what is, in effect, an enormous committee of four Ministers from four different Governments and representatives of four different companies, all collaborating in partnership with a selling organisation based in France and detached from the remainder of the management. We want a new management structure, but I can reassure the hon. Gentleman that it is not my intention that I or any other Minister should take over commercial management decisions. We want managers to take those decisions, and we want the managers to have the right authority and the right information to run the project in the ordinary way.

Industrial Lasers

Mr. Marlow: To ask the Chancellor of the Duchy of Lancaster what assessment he has made of the potential market for industrial lasers, and if he will make a statement.

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. John Butcher): The Department commissioned a study of the industrial laser sector in 1986 and has access to assessments made under Eurolaser, the Eureka programme, to promote the development of high power lasers and their use for materials processing in manufacturing industry. However, it is principally for industry to assess the market potential for industrial lasers.

Mr. Marlow: I thank my hon. Friend for that wideranging, full and eloquently delivered answer. Has he the statistics with which he could illuminate the statement that he has just made?

Mr. Butcher: Yes, Sir. About £260 million was assessed as the total market for industrial lasers two years ago. I am advised that that is growing by about 18 per cent. per annum.

Northern Region

Ms. Quin: To ask the Chancellor of the Duchy of Lancaster when he will next be visiting the Northern council of the Confederation of British Industry to discuss industrial progress in the northern region.

Mr. Atkins: I have no present plans to visit the northern council of the CBI, although I regularly meet northern businesses. During my most recent visit to the region I was encouraged to hear business people themselves confirming the report of industrial progress and prospects for further growth which have figured in successive CBI surveys.

Ms. Quin: Will the Minister seek an urgent meeting with both sides of industry in the north to discuss the proposed closure of Marconi Radar in my constituency? Does he agree that the loss of 450 high-quality jobs such as those, and the decision by Marconi to concentrate production in the south-east, represent a trend opposite to what we wish to see? What action will he take to ensure that the jobs are not lost to the northern region?

Mr. Atkins: I am extremely concerned to hear that Marconi has decided to reduce or close capacity at

Gateshead and Chelmsford. However, those are matters for the company management, which is best placed to judge the market, or lack of it, for particular products.

Mr. Holt: Does my hon. Friend agree that if he goes to the north-east to meet the northern council of the CBI, the Northern Regional Association of Councils or the Teesside chamber of commerce in my area, he will find nothing but expansion, growing job expectations, declining unemployment and the regeneration of the area improving day after day?

Mr. Atkins: My hon. Friend does his area and region a great service by never ceasing to tell us how strongly and how importantly the north-east features in the scheme of things. My hon. Friend is right to say that, although there are still difficulties in the north-east, things are improving. Opposition Members would do better to talk about the successes, rather than continually talking about the weaknesses.

Mr. Radice: May I remind the Minister of the acute shortage of large-scale factory space in the northern region? Can he tell the House what measures he will take to bridge that gap, thereby not holding back the recovery in the northern economy and helping us replace the jobs that have been tragically lost at Marconi and those that will be lost at Swan Hunter as a result of the announcement the day before yesterday?

Mr. Atkins: The hon. Gentleman and many of his colleagues have rightly and understandably raised the problem of the shortage of factory space in the north-east. He will know that when I answered the Adjournment debate that he raised in the House I said that that was a problem of success. I have received a number of representations and contributions, not least from the hon. Gentleman, whose paper we are considering, and I have discussed the matter, together with my right hon. and noble Friends, with English Estates. We hope to be able to tell the House a little more about progress in the not too distant future.

Mr. Cran: Is my hon. Friend aware that if he consults the regional reports of all the councils of the CBI for the past year, including that for the northern region, he will find that they are couched in terms of unremitting confidence and that the only problems they outline are those associated with growth, such as temporary shortages of labour and so on?

Mr. Atkins: My hon. Friend is quite right. There are things happening in the north-east and the northern region that are extremely good for the local and national economy. We have to ensure that that success is built upon. The problems to which hon. Members have referred, such as the shortage of factory space, have to be addressed. I repeat that that, ironically, is a problem of success.

Industrial Competitiveness

Mr. Sean Hughes: To ask the Chancellor of the Duchy of Lancaster how he measures changes in the competitiveness of British industry in the last year; and what comparative information he has for West Germany.

Mr. Butcher: A variety of factors affect the competitiveness of British industry. Price and non-price factors are both important and there is no single measure of competitiveness.

Mr. Hughes: Does the Minister accept that we are now at least 10 per cent., and probably 15 per cent., less competitive than the West Germans than we were at the beginning of last year? When will Government policy on exchange rates and interest rates do something to help rather than hinder British industry?

Mr. Butcher: As has been said, an appreciating currency has been a trend that German manufacturers have coped with brilliantly over the past two and a half decades. They have concentrated on non-price as well as price factors, and we should do the same. They have concentrated on things such as quality, design, marketing and so on. The hon. Gentleman is entirely wrong. If we take an independent measure from the IMF, which incorporates movements in exchange rates, productivity and labour costs, we find that on an index of 100 the United Kingdom, compared to West Germany, was at 112 in 1981, 93 in 1984, moving down to 79·6 in 1986 and 72·2 in 1987. Our productivity is improving in great measure.

Mr. Dykes: Jaguar's motor car production is about 49,000 cars. Is my hon. Friend aware that, in Germany, BMW alone produces 490,000 vehicles? Is not one of the ominous realities that, despite the welcome recovery, we remain a low-output economy in leading manufacturing sectors? As my hon. Friend has attested, the Germans have managed with a high-currency policy to build up their industry and output, mainly through massive investment in new assets and innovation in high technology. When is my hon. Friend confident that we shall be able to do the same? Will he join me in setting a target of overtaking Germany, and how many years does he think that that will take?

Mr. Butcher: I ask my hon. Friend to study the policies that were the foundations for the German economic miracle. He should look at the three principles of those policies, which were put together by Euchen and Erhardt, and he will find strong parallels with British domestic policies today.

Mr. Cousins: Is the Minister's complacency not shaken by the fact that industrial production in engineering has fallen by 2 per cent. in the first three months of this year? Does he not realise that it will take us 25 years to catch up with Japan in the number of industrial robots that we have? Is he not aware that in advanced technology industries we fall further and further behind, as was instanced by the closure of Marconi Radar in Gateshead a day ago?

Mr. Butcher: No, I do not accept that for a moment. At long last British industry is showing a real return on capital. There are very healthy trends in investment programmes in crucial sectors. We are hauling in on the lead of some of our major international competitors. To catch up with Germany, we would need to grow at a faster rate than Germany well into the 1990s. I consider that to be a legitimate objective. If we continue with current policies, what has been mooted as a British economic miracle can happen.

Barlow Clowes

Mr. Day: To ask the Chancellor of the Duchy of Lancaster if he will undertake to compensate investors in Barlow Clowes at an early date in respect of any responsibility borne by his Department which may be discovered in the course of the current investigation.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude): It would be wrong for me to prejudge the outcome of the consideration my right hon. and noble Friend and I shall give to the Barlow Clowes case, including the report of Sir Godfray Le Quesne's inquiry into the facts.

Mr. Day: Is my hon. Friend aware that in 1983, following the intervention of the parliamentary ombudsman in the case of the collapse of Langford Scott—a holder of a Department of Trade and Industry licence, which was a key element in the ombudsman's recommendations that the DTI pay compensation—his Department did, indeed, pay compensation? Will he take account of that precedent in dealing with the case of Barlow Clowes?

Mr. Maude: I am aware of the case to which my hon. Friend referred, but he will understand as well as anyone that no two cases are the same. I do not think that I can add to what I have already said. We shall have to await the outcome of the report and consider what to do then.

Mr. Alfred Morris: Has the Minister read the ombudsman's comments to me on this major scandal? Is he still satisfied that a Department of Trade and Industry inquiry is enough, when at least one other Department may be involved in the scandal? More important still, can he tell me what immediate help he can offer my constituent, Leslie M ullard, who, in his mid-70s, has lost his life savings?

Mr. Maude: The Parliamentary Commissioner has felt unable to comment on the terms of his correspondence with the right hon. Gentleman, as it was written to the right hon. Gentleman in confidence. I was surprised to read reports in today's newspapers that the Parliamentary Commissioner had felt able to conclude that there was an apparent case of maladministration for my Department to answer. I gather that he has since clarified his views in a statement issued earlier today. He stressed that any decision that an investigation is warranted in principle in no way indicates a view as to the merits of the case. Indeed, it could not possibly do so. The Parliamentary Commissioner had not been in contact with my Department at all and the statements by Ministers on which he is reported to have based his view carried no implication of maladministration. It is entirely a matter for the Parliamentary Commissioner whether he investigates individual cases. He is not in any way inhibited from undertaking his own investigation by the independent inquiry that is being undertaken by Sir Godfray Le Quesne.

Mr. Redwood: Is my hon. Friend aware that several leading financial institutions wrote letters to many people encouraging them to invest in Barlow Clowes? Is he further aware that one of my constituents received a letter from the head of marketing of Age Concern, which gave him considerable comfort in becoming an investor in that organisation? Will my hon. Friend give a pledge that the


DTI inquiry will look into the activities of intermediaries, financial institutions and charities, such as Age Concern, in this saga?

Mr. Maude: The activities of intermediaries is obviously an important matter in the investigation and it is certainly an area which has been carefully examined. My hon. Friend will be aware that FIMBRA has already taken steps in respect of two intermediaries which applied for membership of it.

Mr. Campbell-Savours: Does not the principle of compensation in the case of Barlow Clowes have implications for the wider over-the-counter market? Will the Minister reject the comments of Mr. Wilmot, of Harvard Securities, who talked about the loss of one third of an investment portfolio as being acceptable? Is it not clear that the over-the-counter market is just a gigantic con? Will he close it down before many thousands of small investors lose more money that way?

Mr. Maude: It is only fair to say that a good many small companies manage to raise money and create jobs by the over-the-counter market, but it is nevertheless well understood to be a risky form of investment. Those who sell securities on the over-the-counter market make that clear.

Mr. McLoughlin: Has my hon. Friend seen the leader in The Times today, and is he aware that it says that his Department's inspectors are good at producing colourful, well-researched reports after the event, but are poor at prevention? What steps will he take to improve his Department's performance on that?

Mr. Maude: One development is that we now have a completely new regime of investor protection, which is being undertaken by organisations outside my Department. Lessons from the developments which have taken place recently will be an important aspect of our considerations. We shall need to look at what happened and what the outcome of the investigations is, and decide what steps we need to take.

Mr. Beith: How many people invested their redundancy money through this organisation and saw their only prospect of a cushion in retirement being lost, relying when they did so on the existence of the DTI's inspection system'? Will the Minister take that into account when considering the issue of compensation?

Mr. Maude: I am certainly well aware and, I suspect, better aware that most hon. Members, of exactly how many people invested all their spare money in this company and of the anxiety and distress that has been caused. It is important to make a distinction between the two companies involved: Barlow Clowes Gilt Managers, which was United Kingdom-based and subject to United Kingdom regulation, and Barlow Clowes International, which was Gibraltar-based and not subject to United Kingdom regulation.

Sir Peter Emery: Will my hon. Friend make it absolutely clear to the House that whatever the Parliamentary Commissioner may or may not have said, he would want to ensure that the report of Sir Godfray le Quesne is with him in September or October, so that this matter can be brought to some sort of finalisation as soon as humanly possible?

Mr. Maude: I entirely agree with my hon. Friend that it is important that these matters move fast, and they are moving fast. The Parliamentary Commissioner may well prefer to wait for Sir Godfray's report before undertaking his investigation, but that matter is entirely for him. He is not in any way inhibited from undertaking his own investigation before then.

Mr. Gould: Is not the Barrow Clowes case yet another instance of the unacceptable face of capitalism? What comfort can the Minister offer the thousands of people, many of whom are retired, with life savings at stake, who relied on his Department's supervision and who suffered calamitous loss as a result? Does he accept that what they require of him is not that he should take refuge in the delaying tactic of a departmental investigation, but an acknowledgement of his Department's responsibility in this matter and its willingness to compensate them for the loss of their life savings, which they have suffered by virtue of his Department's default?

Mr. Maude: It is pretty disgraceful that the hon. Gentleman seeks to exploit the genuine distress that many people have suffered in this way. It is frankly outrageous that he should suggest that my Department is in any way seeking to delay matters. We have been extremely frank. We have set up an independent inquiry headed by someone of great distinction and independence, and for the hon. Gentleman to say that we should give our response to that inquiry at this stage is manifestly absurd. We must wait to see what it says—wait for an authoritative version of what happened—and we shall decide what to do then.

Single Market

Mr. Bellingham: To ask the Chancellor of the Duchy of Lancaster what initiatives his Department is taking to help small firms understand and take advantage of the legal consequences of the 1992 single European market; and what information he has on the 1992 advertising campaign initiatives in the rest of Europe.

Mr. Maude: Our "Europe Open for Business" campaign aims to encourage firms throughout the country, large and small, to prepare for completion of the single market. About 45 per cent. of all business inquiries we have received on the single market have come from firms with fewer than 20 employees. I understand that only France and Ireland have so far launched major Government awareness campaigns, although I understand that several other countries are planning them.

Mr. Bellingham: I am grateful for that encouraging reply. Is my hon. Friend aware that one of the reasons why unemployment in west Norfolk has almost halved in the past four years has been the effort and contribution made by the small firms sector? Is he also aware that small firms in west Norfolk will not sit back and let 1992 happen? They are already getting geared up to make the most of it. What extra help, assistance and advertising will be given by the small firms service? What effort will it make to help small firms get geared up for 1992?

Mr. Maude: As my hon. Friend said, small firms are already gearing themselves up very well. We shall continue to provide such help as is appropriate for them. My hon. Friend is right to draw attention to the fact that small


firms, as much as big ones, have a great deal to gain from exploiting the opportunities that the single market will

bring, and they must look to their laurels to ensure that they remain, and become more competitive, to meet the challenge that will come from the continent.

Rover Group

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke): With permission, Mr. Speaker, I should like to make a statement about the Rover Group.
I told the House when I announced the agreement we had reached with British Aerospace for the sale of the Government's shareholding in Rover Group that I would try to return to the House before the summer recess to report further developments.
This morning the European Commission decided the outline terms upon which it would be willing to close its state aid procedure. These terms effectively reduce the amount of the cash injection from the Government into Rover Group to £547 million with the consideration remaining at £150 million, but there would have been important relaxations in the tax conditions. Until lunchtime today, it appeared that British Aerospace was prepared to accept these terms. However, at the last minute it has asked for more time to consider the implications of other conditions attached to the Commission decision. Discussions between British Aerospace and the Government are continuing, and I will report to the House further as soon as I am able.

Mr. Bryan Gould: Is not this brief and astonishing statement an embarrassing confession that the Government have got themselves into an unholy mess—a mess that remains unresolved even at the cost of a humiliating rebuff to the Prime Minister and the Secretary of State and of conceding to the EEC control over everything, including the Government's pet privatisation projects, that might still be called British industrial policy?
Does not this mess leave the Government having to answer one or two difficult questions? If British Aerospace were to decide, as now seems in doubt, to go ahead with the reconstructed deal, how is it that the Secretary of State offered it £250 million more than it was prepared to accept? Why was the EEC so much more effective as a negotiator on behalf of the British taxpayer than the Secretary of State? Why was he so profligate with taxpayers' money? Is not this further evidence of how careless the Government are when they dispose of public assets without thought for the taxpayers' interest?
If, on the other hand, British Aerospace shareholders refuse to back the deal, what do the Government have to put in its place? After the Government have put all their eggs in this one basket, where is the fallback position for which we have pressed the Chancellor repeatedly in recent months? Where is the guarantee of the future of the last British volume car manufacturer? Do not Rover's excellent results today show what has been and can be achieved under public ownership, and do they not demonstrate that this ill-starred foray into privatisation is an expensive and shortsighted folly?
If the key to the deal is the tax arrangement whereby British Aerospace hopes to use Rover's tax losses to offset its own tax liability, will this not fall foul of the Income and Corporation Taxes Act 1988? Is it perhaps this potential illegality that is now worrying British Aerospace?
Above all, where is the sense of commitment to the British volume car manufacturing industry that this sorry episode shows is so signally lacking both from the

Government and now, sadly, from British Aerospace? Where is the recognition of the importance of this industry and the guarantee of its future? What reliance can be placed on an arrangement born only of the Government's obsession with privatisation and which even then the Government have bungled'?

Mr. Clarke: My statement may have been surprisingly short, but it is not in the least embarrassing for me, my right hon. and noble Friend the Secretary of State or the Government.
When I last appeared before the House, it was clear that the agreement that we had reached was conditional upon the discussions with the European Commission. My right hon. and noble Friend conducted with considerable skill the negotiations with the European Commission and with British Aerospace. He produced an agreement satisfactory to the Government, to the Commission and, as far as I was aware until an hour or two ago, to British Aerospace. At the last moment, British Aerospace has decided that it wishes to reconsider part of the deal. It is my opinion that the point troubling it is not especially important or material, but that is for British Aerospace, not me, to determine. When we have the result of its deliberations, I shall straight away make a further statement to the House.
The hon. Gentleman's other questions are based, not surprisingly—inevitably in the circumstances—on his ignorance of the precise deal arrived at, but that does not stop him, as usual, speculating or trying to make points out of it. The scale and structure of the original agreement has been changed to reflect the negotiations with the Commission, the compliance with the state aid procedures that the Government support actively inside the EEC, and the considerable improvement in the trading position of the Rover Group since we first entered into our agreement. In my opinion, an agreement can now be reached that is satisfactory to the Government, and I can speak on behalf of the Government.
The hon. Gentleman guessed that the key to the deal might be the illegality of the tax arrangements, but he is wrong. He has made a false guess. The proposals for the tax arrangement are entirely consistent with the law of the land and are not being queried by anybody who understands what he is talking about—which is not the case with Opposition Members, who are speculating. The time to give the details to the House is when we are satisfied that the negotiations are concluded. That is now in the hands of British Aerospace, which I trust will soon come to a decision. I undertake to inform the House fully as soon as I can.

Mr. Norman Tebbitt: Is it not entirely consistent with the Opposition's usual attitude that the hon. Member for Dagenham (Mr. Gould) should damn the deal whether or not it goes ahead? He approves neither of successfully floating it into privatisation nor of keeping it nationalised. Does my right hon. and learned Friend agree that, although great progress has been made by the Rover Group, and despite what the hon. Gentleman called splendid results, it is taking £400 million or £500 million in cash to persuade anyone to take the business away?
In his further talks with Commissioner Sutherland, will my right hon. and learned Friend express the hope that if this is the sauce which is applied to the British goose there had better be the same sauce for the German gander when


the proposed merger between MBB and Daimler Benz comes forward, with a proposed subsidy of about £1 billion?

Mr. Clarke: I agree with the first part of my right hon. Friend's question. The hon. Member for Dagenham (Mr. Gould) condemned the conditional agreement we reached; although he could not make up his mind whether we were making too big or too small a cash injection into the company, he was against it. He has condemned today's agreement without knowing what it is. He will continue to condemn whatever emerges. To be fair, I think he prefers a nationalised Rover Group. That is the regime under which the company cost the British taxpayer £2·9 billion since British Leyland was nationalised in 1976.
We must sort out the matter. I have to make it clear that our problem is not with Commissioner Sutherland. We have entered into a satisfactory agreement with the commissioner, consistent with the state aid proposals which this country supports. We do not think there should be competition in subsidies throughout western Europe. The British Labour party thinks that, but we and the Commission do not. I agree with my right hon. Friend that we will expect the Commission to take seriously talk in the press of massive German injections of state aid into companies like MBB.

Mr. Robert Sheldon: Is the Chancellor of the Duchy aware that not only are all the changes confusing but they put in doubt the nature of the deal which might be expected? Is he aware that the Public Accounts Committee will certainly want to scrutinise carefully the various changes to make sure that he is getting the best possible deal on behalf of the taxpayer and is ensuring that we get value for money at the end of the day?

Mr. Clarke: The right hon. Gentleman is a careful man, so he rightly expresses doubt at a time when, for obvious reasons, he cannot know the full details of the agreement. I hear what he says about the Public Accounts Committee rightly wishing to take an interest once the matter has been concluded. I assure the right hon. Gentleman that the Government have been careful to make sure that the interests of taxpayers, the company and the economy are taken care of in the discussions.

Mr. Tim Smith: Regardless of what the shareholders of British Aerospace may think about this —surely they are entitled to reconsider the matter when there has been such a significant change in the terms—is it not the case that the deal offers much the best future for the Rover Group? When the company was to be offered for sale to foreign owners, the Opposition did not like it, and when it was to be British ownership they did not like that either because they have not go a constructive thought in their heads about it.

Mr. Clarke: Of course, the shareholders in British Aerospace have not yet entered directly into the matter. Anything that emerges from the discussions now taking place will have to go to an extraordinary general meeting of the shareholders if the British Aerospace board continues to be in agreement with the deal. Certainly I have made it clear throughout, as has my right hon. and noble Friend, that we see considerable attractions in a

satisfactory agreement of this kind. We think that the uniting of British Aerospace with the Rover Group would be welcomed by those who work in the company and by all who supply and deal with the product as well.

Mr. Terry Davis: Is not the Minister aware that we have now got the worst of all worlds? Unless the uncertainty created by the Government's policy is resolved quickly, it will be unnecessarily difficult for the Rover Group to sell cars during August, one of the most important selling months in the year.

Mr. Clarke: I agree that it would be worrying if uncertainty surrounded the Rover Group for any longer than was necessary. I share the hon. Gentleman's concern that that should not be so. I trust that any difficulties are resolved rapidly and that I can report to the House in the very near future. I expected to be able to make a statement to the House this afternoon expressing in full the terms of the agreement. I thought that British Aerospace was in agreement with that, but as it has asked for more time neither I nor my right hon. and noble Friend had any alternative but to agree.

Mr. Teddy Taylor: Can the Minister say something about the great distress and uncertainty caused to the splendid Rover Group whose cars I have always bought and found satisfactory? Is he really saying that the Government are reducing the aid to be given to Rover because Commissioner Sutherland has asked it but that they will make it up by what he calls tax concessions?
Is that a sensible state of mind?
Does my right hon. and learned Friend appreciate the views of British Aerospace, which, like many British companies, feels rather aggrieved that we always reveal full details of financial transactions, yet, in the case of Airbus, where British Aerospace is carrying a horrendous loss, the other three participants never reveal any details about the money given by their Governments? Is it not time to ask the Commission to ask other countries to act as cleanly in financial terms as Britain does?

Mr. Clarke: I agree with most of what my hon. Friend has said, except that, in the case of the Airbus project, not one of the four partners reveals full information to any of the other three, nor does the Commission take any part in the matter.
In principle, I agree with my hon. Friend that we should establish in Europe a regime whereby state aids are fully exposed to the Commission and other members, needless competition between countries is avoided and the matter is policed by the Commission in accordance with the Community's agreed policy. Last year the Commission changed our deal on Leyland-DAF. It changed the French Government's recent Renault proposals and we shall expect it to take a close interest in the Italian Government's proposals for the restructuring of its steel industry in southern Italy and in the German proposals for the aircraft industry and the Daimler Benz-MBB deal.
There is, therefore, no disagreement between my hon. Friend and me. We discussed the deal, which was satisfactory, with the Commission and we shall wait to see whether British Aerospace confirms the impression with which it left us this morning, that it found the deal satisfactory.

Mr. Matthew Taylor: Is not the Minister looking as red today as would do credit to the Labour Front Bench, not only as a result of the fiasco in which he has involved the House this afternoon, but also because the golden give-away terms of the deal have been exposed by the Commission and it has been shown that British Aerospace is not interested without a golden give-away? Will the Minister at least be honest enough to tell the House what the sticking point is with British Aerospace and what he will do about it if the deal falls through?

Mr. Clarke: My florid complexion is a natural result of my healthy lifestyle. I agree that it contrasts somewhat with the pallor of the hon. Gentleman, who does not appear to get into the open air very much in the south-west of England.
The agreement reached is based on changes to the structure and scale of the original agreement, which was always conditional upon Commission consent. However, I hope that the House will agree that it is obviously not sensible for me to relate the exact nature of the agreement until the final snag with British Aerospace—if it proves to be a snag—has been resolved. It would be wrong for me to start trailing in discussion the points at issue, particularly as I am still somewhat puzzled to discover that British Aerospace believes the matter to be so significant.

Mr. Anthony Beaumont-Dark: Does my right hon. and learned Friend accept that, basically, the most important thing is that Austin Rover should remain a British national based on another excellent British company, British Aerospace? Does he further agree that, although British Aerospace may be a little coy at this time, it may work out that, with the tax concessions and the excellent future of Austin Rover, which has turned a £39 million loss into a £7 million profit, this is a great venture for it?
Does my right hon. and learned Friend further agree that, although the Opposition are suggesting that the deal should be allowed to fall through, British Aerospace is willing to commit £1,000 million to the future of the great technological advance of this country, which is what we need, should have and, I believe, can have?

Mr. Clarke: My hon. Friend is a significant voice in such matters in the west midlands and in the House and I hope that those people concerned with the last-minute consideration of the agreement will bear in mind his opinions.
British Aerospace is one of the key manufacturing companies in this country. It produces extremely advanced, high-technology aircraft. The Rover Group has announced extremely encouraging results today and is doing very well, thanks to Graham Day and the management and work force of the company. I note my hon. Friend's opinion that a purchase by British Aerospace would be to the advantage of all concerned.

Mr. Andrew Smith: Are we not having today a demonstration of breathtaking incompetence on the Government's part in this matter? Will the Minister tell us what the snag, as he described it, is—or does he not know? He confessed to being puzzled. Does that not show the irresponsibility with which the Government are handling the matter? Will not the uncertainty generated by the statement damage the interests of car workers in this country and all those who depend on their work? Have not

the Government made a mess of this? What will the Minister do if the deal falls through and British Aerospace will not go along with Rover?

Mr. Clarke: The hon. Gentleman cannot reasonably cast doubts on the Government's position. I know exactly what the agreement is. My right hon. and noble Friend negotiated a satisfactory conditional agreement a few months ago, on which I reported to the House, and he has negotiated a satisfactory agreement with the Commission and BAe. It is BAe's management which decided at the last moment that it wanted a little more time to think about one detail. I know what that detail is. It is not for me but for BAe to reach a decision on that. I am merely saying that I am surprised that the management attaches so much weight to it. However, I trust that that problem will soon be resolved.
I have already explained that it plainly is not sensible for me to start conducting the next stage in the negotiations in this forum; it would not help the Rover Group or anybody else. I hope that I shall soon be able to bring fuller and more satisfactory news to the hon. Gentleman who has a perfectly valid and legitimate constituency interest.

Mr. Michael Stern: Will my right hon. Friend confirm that in view of today's events he is now open to receive alternative bids for the Rover Group, whether from Britain or abroad; and if not now, when'?

Mr. Clarke: I have been avoiding hypothetical questions. My hon. Friend is jumping the gun more than somewhat. As I received the news that BAe wanted more time in a message from its chairman only two and a half hours ago, it may be that in two and a half hours' time all will be resolved. It remains the Government's clear commitment to return the Rover Group to the private sector, and the continuing good performance of that company under the leadership of Graham Day with the support of the work force is taking us encouragingly in that direction by whatever route.

Mr. Dave Nellist: As a determined opponent of Rover privatisation and the Common Market, may I at least welcome the Minister's statement on the delay on the basis of any port in a storm? If he wants to stop speculation in the disagreements—not the agreement—that have emerged in the past two and a half hours, after Sir Raymond Lygo said that the basis of BAe's wanting Rover was on the basis of no cost to the company, apart from the risk, will he confirm what happened this morning at the commissioner's meeting in terms of amendments and conditions that has caused BAe to back off? If Commissioner Sutherland can negotiate a £253 million reduction in BAe's bribe, why could not the Minister?

Mr. Clarke: There was a full meeting of the Commission this morning, at which it approved the terms negotiated by Commissioner Sutherland, just as the Government have supported and approved the terms negotiated by my right hon. and noble Friend. I shall let BAe know that the hon. Gentleman approves of its last-minute request for more time; it might encourage it to make up its mind and to look at the deal with more interest again. As is invariably the case as a result of discussions with the Commission because of its duty under the state aids regime, there have been changes in the scale and


nature of the deal, as there were last year in the case of Leyland-DAF and recently in the case of Renault. What has emerged is, I believe, satisfactory to all the parties, but it is not for me but for the BAe board to decide whether it is prepared to go ahead and recommend it to its shareholders.

Sir Giles Shaw: My right hon. and learned Friend is still to be congratulated on the zeal with which he is pursuing the deal, and I am glad to hear him say that he is satisfied with what Commissioner Sutherland has to say on this issue, but, in view of the problem that has occurred, what time limit has he placed on BAe to make its decision clear, since it is surely BAe which has failed to respond to what was a good offer originally?

Mr. Clarke: We are not in a position to impose a time scale. BAe is entitled to ask for more time to consider the matter and it will appreciate the need to come to a final decision as rapidly as possible. I cannot give my hon. Friend any more information than I have, since I discovered only at half-past one that BAe wished to delay a final decision and at half-past two I was on my feet here answering questions. Perhaps by the time I return to the office all will be resolved so that I can come back to the House as soon as possible to give the final details.

Several Hon. Members: rose—

Mr. Speaker: Order. We have a very long day ahead of us. I will allow questions to continue for a further five minutes. As the Chancellor of the Duchy has just said, this is an interim statement.

Mr. Tam Dalyell: Is the Chancellor of the Duchy aware that any questions from me will be extremely gentle and cautious as I spent 25 years involved in the motor industry and I am aware how the industry may change its mind at the last moment? He has my personal sympathy for these difficulties. Having said that, will he say something in the new statement about Bathgate, where the Rover Group still owns what was the biggest concentration of machine tools under a single roof in Europe? That may not be a central problem, but it is very important for my constituents.

Mr. Clarke: The hon. Gentleman has reminded me yet again of his concern about the Bathgate site. I believe that that is a planning matter to be resolved by the local authority and by my right hon. and learned Friend the Secretary of State for Scotland. However, I will bring myself up to date with events. I share the hon. Gentleman's desire to see the site brought back into productive use and providing employment for his constituents once again. I am sure that my right hon. and learned Friend the Secretary of State for Scotland shares that desire.

Sir Peter Hordern: Is it not clear that those who work for the Rover Group will be much better off under British Aerospace than they would be if the Rover Group continued to go cap in hand to the Government for more funds? After the expenditure of £2·9 billion, is it not a matter for congratulation and in the public interest that the House has the prospect of staunching this endless flow of money?

Mr. Clarke: I agree that, apart from this unexpected last-minute hitch, our present position is so much more satisfactory than anyone could have thought possible had the Rover Group continued to be in public hands. The Rover Group's performance is steadily improving and plainly we have reached the stage where it should be returned to the private sector where I am sure that it would be much better off than it used to be as a pensioner client of the Government.

Mr. Bob Cryer: Is the Department of Trade and Industry so inefficient that it takes an EEC commissioner to point out the bare-faced robbery of the British taxpayer through this proposed deal by British Aerospace? Does not the Chancellor of the Duchy realise that in his zealotry and bigotry to sell off a publicly owned company he is causing uncertainty in the private sector? Major component suppliers such as Hepworth and Grandage in Bradford which supply the majority of the pistons to the Rover Group inevitably must face a degree of uncertainty, like the rest of the industry, including the Rover Group, as a result of this shilly-shallying. Why cannot the Chancellor make a commitment to retain public ownership so that every company in the components supply industry knows precisely where it is?

Mr. Clarke: I will not explain again the basis on which everyone who has any experience of the state aids case knows that the deal was bound to emerge in the course of discussions with the European Commission. The hon. Member for Bradford, South (Mr. Cryer) sounded as if he was endorsing the final decision that we reached with Commissioner Sutherland. That is very welcome, and I look forward to the hon. Gentleman's support when he finds out what he is talking about and when he sees the scale and structure of what we have negotiated.
We are satisfied, the Commission is satisfied, and I believe that the taxpayer should also be satisfied. The component suppliers to whom the hon. Gentleman has referred have always been strongly in favour of the sale of British Aerospace. As I explained in an earlier statement, I think that it is in their interest that an agreement of this kind should be entered into.

Mr. Roger King: Will my right hon. and learned Friend accept that in my constituency the Rover Group plant at Longbridge, the Lode lane Land Rover plant, the Cowley plant and others have worked outstandingly well to produce the good results for the Rover Group, as we have seen? Is he aware how much each and every one of the employees looks forward to working for an excellent company like British Aerospace? On behalf of all the employees, will he convey to the British Aerospace board the message that faint heart never won fair lady?

Mr. Clarke: I join my hon. Friend in congratulating the work force on the welcome improvement and results. The half-yearly results show a profit before interest of £28·8 million, compared with a loss of £10 million for the same period last year. That improvement in the group's performance had its bearing on the negotiations about the agreement as it ceased to be conditional and we talked about a final agreement which we believed should be accepted to achieve the result that my hon. Friend desires.

Mr. Dennis Turner: Would it not be a good idea if the Chancellor of the Duchy


of Lancaster were to nip off to his office to find out the up-to-date situation? He might then put us all out of our misery. We shall keep the debate going while he is away.

Mr. Clarke: I agree entirely with that suggestion. I am dying to get back to my office to find out what is happening.

Mr. Iain Mills: Does my right hon. and learned Friend agree that this is a bad day for the Opposition? Does he agree also that, on a day when the Rover Group announced good results and when the partnership between two great British companies is still continuing, it is quite devastating to find Opposition Members laughing and negative and that they do not regard the matter as important? My final question is on behalf of the components industry and dealers. Will my right hon. and learned Friend ask Opposition Members whether they would prefer a deal with a foreign cartel?

Mr. Clarke: I agree with my hon. Friend. Opposition Members came to the House prepared to denounce the agreement, whatever it was, and they are still trying to denounce it, but they cannot find out what it was or what it might be. They do not know what they want, so I shall not put the final propositions to them. I do not believe that there is any undue cause for concern among dealers and others in the industry. I hope to be able to report back to the House as soon as I can.

Dunstaffnage Marine Research Laboratory

Mrs. Ray Michie: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the loss of 20 jobs at the Dunstaffnage marine research laboratory, near Oban, in my constituency.
The announcement, made at 4 o'clock yesterday afternoon, deals a double blow. At a time of concern for the sea and the management of the resources that it contains, the announcement underlines the need to do more rather than less marine research. Because of the huge development of the fish farming industry in the Highlands and Islands and in my constituency of Argyll and Bute in particular, research should have a high priority.
The laboratory is funded by the Natural Environment Research Council, and the issue is not just one of straightforward, all-round reduction in NERC activities. The lastest cuts hit marine science more than anything else, and they are illogical and misconceived. The laboratory is one of the largest employers in the area, employing 70 people. Staff redundancies of that magnitude will undoubtedly affect the non-tourist element of the local economy and have damaging and grave consequences for a small town such as Oban. I urge that the issue be debated.

Mr. Speaker: The hon. Lady asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that she believes should have urgent consideration, namely,
the newly announced job losses at Dunstaffnage marine research laboratory near Oban and their effects on the Government's research programme.
I have listened with great care and concern to what the hon. Lady has said on behalf of her constituents, but I regret that I do not consider the matter that she has raised as being appropriate for discussion under Standing Order No. 20, and I cannot therefore submit her application to the House. I hope that she will find other ways of raising it.

Nurses' Pay Award

Ms. Joan Walley: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing an urgent, specific and important matter with which you have dealt favourably in the past, Mr. Speaker, namely,
the underfunding of the nurses' pay award.
The matter is important and should have priority over all other business in the House if we are to avert the crisis in our National Health Service, in its 40th year, which was almost on the cards earlier this year, and which was averted only as a result of your actions, Mr. Speaker.
It is urgent because it has just come to light in an article in The Guardian today that it looks as though the Government's promises to meet the nurses' pay award in


full are not now to be met. I do not wish nurses' morale to be so low that our National Health Service crumbles as a result of the Government's broken promises.
It is important that the promised grading review should be done in an objective way. Those who are employed by the National Health Service can have no confidence in the Government if they consider that their pay is to be determined by a top ceiling and that their work will not be properly evaluated. In my constituency of Stoke-on-Trent, North and in the west midlands, I have seen nursing staff leaving the National Health Service. They are not leaving in great numbers because they are banking on the review. They have still not received the 4 per cent. in their pay packets. If we are to avert a further crisis, we should have a debate.
Health Service workers, and nurses in particular, need reassurance from the Government. We need a debate before the summer recess. The Secretary of State may well have said that he received a standing ovation when he last met the nurses, but if he is to be true to his policies full reassurances need to be given by the Government. They can be given only if we adjourn and fully debate the matter now.

Mr. Speaker: The hon. Lady asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that she believes should have urgent consideration, namely,
the Government's underfunding of the nurses' pay award.
I have listened with care to what the hon. Lady has said about the matter. As she knows, my sole duty in considering an application under Standing Order No. 20 is to decide whether it should be given precedence over the Orders set down for today or tomorrow and whether it meets the criteria laid down by the Standing Order. I regret that I cannot submit her application to the House.

Order Paper

Mr. Eric Forth (Mid-Worcestershire): On a point of order, Mr. Speaker. Will you confirm that, among your many responsibilities to the House, it is your responsibility

to ensure that the items that appear each day on the Order Paper are in order, acceptable and relevant to the House, and that you do that through the excellent work of the Clerks and, through them, your instruction to the Table Office? Will you confirm also that this week you gave particular instructions to the Table Office and the Clerks to ensure that any hon. Member who might seek to put an item on the Order Paper would be present in the House, would present it and, if necessary, vote on it? Have you particularly drawn attention to the fact that, if he should seek to put anything on the Order Paper, the Leader of the Opposition is far away and indulging in business that is detrimental to this country and is quite unable to fulfil any obligations that he may have in respect of the Order Paper?

Mr. Speaker: I thank the hon. Member for what he has said about my responsibility for the matter. The whole House will agree that anything that appears on the Order Paper is in order; otherwise it would not so appear.

Mr. Frank Dobson: Further to that point of order, Mr. Speaker. In view of the excellent services that the Clerks provide, will you ask them to place on the Order Paper or in Hansard a list of all orders and motions in the name of the Prime Minister that have been tabled when she has been out of the country?

Mr. Speaker: We should move on.

BILL PRESENTED

COMPENSATION ADVISORY BOARD

Mr. Jack Ashley, supported by Dr. Michael Clark, Mr. Frank Cook, Mr. Frank Haynes, Mr. Simon Hughes, Mr. Alfred Morris and Mr. Roger Sims, presented a Bill to establish a Board to make recommendations for the levels of compensation awarded to injured persons; and for related purposes: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 200.]

Education (Right to Nursery Places)

Mr. Keith Vaz: I beg to move,
That leave be given to bring in a Bill to place on local authorities the statutory duty to provide free nursery places for all children at local authority nurseries.
Education begins from birth. The true value of our society is the way in which we prepare for our future. Investing in our children and securing for them the best possible opportunities and facilities is the greatest investment that we can make. What I propose is neither radical nor new. In 1936, the Board of Education on nursery schools and classes described pre-school classes as
on the fringes of official organisation, more or less acknowledged, better or worse provided for as opinion varied in regard to them.
The Education Act 1944 placed a duty on local authorities to provide a discretionary power to provide nursery education. In 1967, the Plowden report strongly advocated nursery provision for all three-year-olds and four-year-olds. In 1972, a White Paper on education published by the Prime Minister in her previous incarnation stated that the Government's
aim is that within the next 10 years nursery education should become available without charge … to those children of three and four whose parents wish them to benefit from it.
Sixteen years later, the Goverment's position has changed but it is still hampered by the Treasury. The White Paper "Better Schools" stated:
In view of the benefits of education for the under fives, and parental demand for provision, the Government will make it its aim that its plans for local authority expenditure should allow provision attributable to under fives to continue in real terms".
The Select Committee report on primary schools dealing with provision for the under-fives strongly set out the arguments for pre-school education.
Local authorities have a statutory duty to provide full-time education for children from the beginning of the term after they reach their fifth birthday. In 1983, only 23 per cent. of three and four-year-olds received any form of nursery education, and 700,000 of them received none. Today, a little more than I million of them are receiving some kind of education. The state provides only half in formal classes, for a total of 308,000 children. There are more than 3·5 million children uder the age of five. Ninety per cent. of parents with three or four-year-old children, and 40 per cent. of parents of children under three years of age, want some form of nursery places for them.
Over the past decade, the voluntary sector has flourished. It is right that I should pay tribute to two organisations that have led the fight. They are the Pre-School Playgroups Association, which links an estimated 600,000 families in 430 branches, and the National Children's Bureau, which launched an under-fives unit in 1986. Playgroups provide 34 per cent. of the places for under-fives, and it is estimated that 52 per cent. of all three and four-year-olds in England attend playgroups compared with 22 per cent. of the same group in nursery schools and classes and 23 per cent. in primary schools. Although playgroups account for more than half the number of pre-school places, local authority financial support is low in most areas and non-existent in others.
Government statistics reveal enormous differences between one part of the country and another. Some have reached impressive levels of three and four-year-olds in

nursery schools—Hounslow, 69 per cent.; Newham 63 per cent.; and Wolverhampton, 56 per cent. Others ought to be ashamed of themselves., with the percentage of three and four-year-olds in nursery schools in Suffolk being 13 per cent.; Norfolk, 5 per cent.; and Bromley, 1 per cent.
The chances of a nursery place depend entirely on where one lives. In Leicestershire, where only 23 per cent. of three and four-year-olds are in nursery classes, there are huge differences within the county. Fifty-nine schools have provision for three-year-olds, 52 schools for four-year-olds, and 188 schools no provision at all. Lack of staff, capitation and accommodation are the reasons given. In my constituency, as in those of other hon. Members, I am sure, other groups and organisations provide certain facilities, ranging from playgroups in local churches—such as at St. Mary's, Humberston—to the Avalon youth project, and to the mothers' and toddlers' groups that meet in the neighbourhood centres of Netherhall, Northfields, Evington, Coleman and Thornby Lodge. I have visited all of them and they are all starved of resources.
In terms of child care, we are sliding behind the rest of Europe. Belgium and France provide free nursery education for children from the age of three, and Sweden is working towards an integrated system of child centres, community care and education under the same Ministry.
The role of women has changed dramatically, and that has added to the demand for nurseries. Women now make up 43 per cent. of the work force; 23 per cent. of all women with children under five work, and many more would like to do so.
In this area, there is a multiplicity of organisations with which to deal—playgroups, mothers' and toddlers' groups, child minders and nursery places. But separate management and planning systems for pre-school provision remain one of the greatest barriers to the development of a coherent policy. Only Strathclyde authority, whose record I commend to the House, has so far centralised the management of services for the under-fives in one department. A further 21 authorities have an under-fives sub-committee.
My Bill would establish a national policy framework for under-fives provision that will include a statement of objectives of provision and regulations for the coordination of statutory and voluntary sector provision. It will give three and four-year-olds an opportunity for pre-school education and care in whatever setting. It will establish the fact that statutory provision does not mean just nursery schools and classes but includes playgroups, mothers' and toddlers' groups, and possibly child minders.

My Bill will also ensure that local authorities will have an obligation to consult with and be empowered to fund the voluntary sector. Parents will be consulted, so that resources will be based in the community, within pram-pushing distance.
There should be a national, interdepartmental body concerned with the under-fives. The dispute between education and social services must cease. At a local level, local authorities will be made to establish new under-fives sub-committees and submit plans for the provision of pre-school services. Finally, my Bill will give workers access to training and opportunities.
All recent surveys show that some form of pre-school education gives children an enormous intellectual boost. This Bill is a toddlers' charter. With a rattle in one hand and with a book in the other, our children can be endowed with the incalculable gift of knowledge. If we fail to


respond, in later years our children will be able rightly to accuse us betraying their trust and squandering their future. I commend the Bill to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. Keith Vaz, Mr. Thomas McAvoy, Mrs. Maria Fyfe, Mr. Ian McCartney, Mr. Alan Williams, Mr. Dennis Turner, Mr. Jimmy Hood, Mr. Jimmy Wray, Mrs. Alice Mahon, Mr. John Battle, Mr. David Hinchliffe, Mr. Derek Fatchett and Miss Ann Clywd.

EDUCATION (RIGHT TO NURSERY PLACES)

Mr. Keith Vaz accordingly presented a Bill to place on local authorities the statutory duty to provide free nursery places for all children at local authority nurseries: And the same was read a First time; and ordered to be read a Second time upon Wednesday 27 July, and to be printed. [Bill 198.]

WAYS AND MEANS

Conversion of Building Societies into Public Limited Companies

Motion made, and Question proposed,

That provision may be made in connection with transfers in accordance with section 97 and the other applicable provisions (within the meaning of that section) of the Building Societies Act 1986.—[Mr. Peter Lilley.]

Mr. Chris Smith: I shall not detain the House for more than a moment, but it is worth placing on record at this stage, as we did during the Committee proceedings, the fact that the Opposition are deeply unhappy at the prospect of mutual building societies converting to plcs. We believe that much that is good about the building society movement will be lost if that occurs. However, this resolution relates specifically to the possibility that later in today's proceedings we shall have an opportunity to debate Government amendment No. 75, which enshrines a principle for which we argued in Committee. We are grateful to the Government for taking that issue on board. It would be churlish of us to do anything other than wish godspeed to this resolution.

Question put and agreed to.

Orders of the Day — Finance (No. 2) Bill

Not amended (in the Committee), and as amended (in the Standing Committee), considered.

Mr. Teddy Taylor: On a point of order, Mr. Speaker. Will it be possible for you to reconsider the provisional selection and to include new clause 20? There are very special circumstances. If there were not, I would not mention it. First, if we do not discuss new clause 20, the House will have no opportunity of discussing in detail the application of VAT to hearing aids and spectacles, which is a very important issue. It also means that the House will not be able to discuss an issue that is constitutionally important—the decision of a foreign court in instructing the Government what tax to levy. Bearing in mind that a decision was made after the Bill's Second Reading, and that the House had no opportunity to consider those matters in detail, there is a case for having a straight debate on new clause 20.

Dr. John Marek: Further to that point of order, Mr. Speaker. The Minister has agreed to do something about vouchers for spectacles and the increase that will be necessary because of VAT being charged on them. Could he make a statement now, or get one of this colleagues from the Department of Health and Social Security to do so? Perhaps he could make such a statement if you selected the clause for debate.

Mr. Speaker: I examined the new clauses and amendments very carefully this morning, and I do not think that I can reconsider my selection at this stage. The hon. Gentleman will know, however, that clause 13 has been included in the Bill, and it would be perfectly in order to debate the matter on Third Reading.

Ordered,
That the Finance (No. 2) Bill, as amended, be considered in the following order, namely, new Clauses, amendments relating to Clause 1, Schedule I, Clauses 2 to 4, Schedule 2, Clauses 5 to 35, Schedule 3, Clauses 36 to 50, Schedule 4, Clauses 51 to 57, Schedule 5, Clauses 58 to 64, Schedule 6, Clauses 65 to 94, Schedule 7 Clauses 95 to 106, Schedule 8, Clauses 107 to 111, Schedule 9, Clauses 112 to 142, Schedule 10, Clause 143, Schedule 11, Clauses 144 to 146, new Schedules, amendments relating to Schedule 12.—[Mr. Kenneth Carlisle.]

New Clause 18

UNIT TRUSTS: RELIEF ON CERTAIN PAYMENTS

'. Section 469 of the Taxes Act 1988 (taxation of unauthorised and certain other unit trusts) shall have effect, and shall be deemed always to have had effect, with the insertion of the following subsections after subsection (5)—

"(5A) Subsections (5B) below applies where for any year of assessment—

(a) the trustees are (or, apart from this subsection, would be) chargeable under section 350 with tax on payments treated as made by them under subsection (3) above, and
(b) there is an uncredited surplus in the case of the scheme.

(5B) Where this subsection applies, the amount on which the trustees would otherwise be so chargeable shall be reduced—


(a) if the surplus is greater than that amount, to nil, or
(b) if it is not, by an amount equal to the surplus.

(5C) For the purposes of subsections (5A) and (5B) above whether there is an uncredited surplus for a year of assessment in the case of a scheme (and, if so, its amount) shall be ascertained by—

(a) determining, for each earlier year of assessment in which the income on which the trustees were chargeable to tax by virtue of subsection (2) above exceeded the amount treated by subsection (3) above as annual payments received by the unit holders, the amount of the excess,
(b) aggregating the amounts determined in the case of the scheme under paragraph (a) above, and
(c) deducting from that aggregate the total of any reductions made in the case of the scheme under subsection (5B) above for earlier years of assessment.

(5D) The references in subsection (5C)(a) above to subsections (2) and (3) above include references to subsections (2) and (3) of section 354A of the 1970 Act.".'.—[Mr. Norman Lamont.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Norman Lamont): I beg to move, That the clause be read a Second time.
The new clause addresses a technical problem affecting the rules for taxing the income of unauthorised unit trusts. We discussed the matter briefly in Committee. The present rules can produce an excessive tax charge on a trust. 'That occurs when the trust income for a tax year is less than the income that it distributes to its unit holders. The extra tax charge will reduce the amount that the trustees can distribute and will therefore disadvantage unit holders, including charities and pension funds.
The point was raised by my hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot), who tabled a new clause that we were unable to accept. I said that we would table our own new clause.

Mr. Nicholas Brown: If we were living in the mid-17th century—and given the way our proceedings have gone in the past week one could be forgiven for being under such a misapprehension—the new clause would be known as the Concession of Arbuthnot, in honour of the hon. Member for Wanstead and Woodford (Mr. Arbuthnot). That has a nice mid-17th century ring to it. The one late-20th century point of which the Financial Secretary should have informed the House is how much it will cost, and I wonder whether he would do so now.

Mr. Norman Lamont: The cost will be minimal.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 19

VALUATION OF INTERESTS IN LAND

'.—(1) In section 294 of the Taxes Act 1988 (companies with interests in land), after subsection (5) there shall be inserted—
(5A) For the purposes of this section, the value of an interest in any building or other land shall be adjusted by deducting the market value of any machinery or plant which is so installed or otherwise fixed in or to the building or other land as to become, in law, part of it.

(2) This section shall have effect in relation to valuations which fall to be made after the passing of this Act.'—[Mr. Norman Lamont.]

Brought up, and read the First time.

Mr. Norman Lamont: I beg to move, That the clause be read a Second time.
In Committee the Opposition tabled an amendment which would have prevented the land and buildings description on the business expansion scheme from applying to manufacturing companies. At the time, I said that I did not want to favour a particular industry in the way that they suggested, but that I recognised the problem posed to companies with valuable fixed plant. As a result we have devised the new clause.
Where plant and machinery form part of a company's land or buildings, they are taken into account when the land and buildings are valued. The new clause will deduct the value of plant and machinery from that of land and buildings. The change will be of particular help to companies with valuable specialised plant and machinery. It is not confined to any particular sector, but will apply to all companies that qualify under the BES rules.

Mr. Chris Smith: In Committee we highlighted many of the problems that we saw in the operation of the business expansion scheme. One of those problems was the low percentage of BES companies within the manufacturing sector. That percentage is going down rather than up, and we fear that it will go down even further with the institution of the new rented accommodation scheme introduced by the Budget and the Finance Bill.
We argued strongly that some extra incentive should be given to assist manufacturing industry trying to raise investment through BES. The Government accepted the principle, but we are disappointed that they have not taken the route that we suggested, which was to single out enterprises within industrial use classes 2, 3 and 4. However, they have recognised the need to give some consideration to companies in this position.
We will give two cheers for the new clause. It is a concession of sorts to the points that we put in Committee, and although we do not feel that it goes far enough or takes the right approach, it is none the less welcome.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 23

DEFERRED CHARGES ON GAINS BEFORE 31ST MARCH 1982

'.Schedule (Deferred charges on gains before 31st March 1982) to this Act (which provides for the reduction of a deferred charge to tax where the charge is wholly or partly attributable to an increase in the value of an asset before 31st March 1982) shall have effect.'.—[Mr. Norman Lamont.]

Brought up, and read the First Time.

Mr. Norman Lamont: I beg to move, That the clause be read a Second Time.

Mr. Speaker: With this we may take Government amendment No. 73.

Mr. Lamont: In Committee a number of my hon. Friends expressed concern that the rebasing provisions would not apply where tax on gains had been deferred between 1982 and 1988. My right hon. Friend the

Paymaster General undertook to review the position and see whether something could be done to meet those cases. We have also received a number of representations on the matter.
This is an issue on which the arguments of principle cut both ways. On the one hand, the full benefit of rebasing is available where the deferral took place on or before 31 March 1982. So to give no benefit from rebasing where the deferral was between 1982 and 1988 might appear a little harsh. On the other hand, we must recognise the opposite argument, which is the comparison with those who in the same circumstances opted not to defer tax and will have already paid it in full without the benefit of rebasing. None the less, we have concluded after careful consideration that on balance there is a case for providing some relief in the circumstances that I have outlined.
A huge range of provisions provide for tax deferral in one form or another. The circumstances in which the reliefs can apply, and the potential permutations where more than one relief is involved, are numerous. Some cases—for example, where gains on business assets have been rolled over within a group of companies—will be extremely complex. In other cases, records will frequently not be available of assets on which tax has been deferred. That is because for purely practical reasons it is often unnecessary to retain such information. An example is where a gain on the disposal of a business asset has been rolled over against the cost of a replacement asset. Once the gain to be rolled over—and hence the reduced cost of the replacement asset—have been established, there is no need in practice to retain records relating to the history of the old asset. Even the Inland Revenue does not keep records for ever.
The matter presents the Government with something of a dilemma. Where a deferral has taken place since 1985, a March 1982 valuation will probably have been made for indexation purposes. Other things being equal, it would be possible to confine the tax charge to the post-1982 component of the gain, although even here only if the records of what underlies the deferred gain have been kept.
On the other hand, if the deferral took place after 1982 but before 1985, there will not have been a March 1982 valuation. In the case of a gift made during that period, there is no reason why the donee should know when the donor acquired the asset, and the donor's records might well no longer exist. Accordingly, there would be difficulties in extending rebasing to even the most straightforward case.
At the other extreme, there will frequently be more complicated cases—perhaps where there is a chain of deferrals, one asset being rolled over into another under the same or more than one provision. A business asset may have been sold in, say, 1984, the gain rolled over against a number of replacement assets with rollover relief being claimed. Some of those assets may since have been sold with tax paid at the time. Others may have been replaced, and yet others may still be held by the taxpayer. Even where full records of all the transactions are available, it would be a formidable task to identify the pre-1982 component of the gain which had not already been brought into the charge. Some of the amendments moved by my hon. Friends during the debate in the Committee of the whole House recognised that difficulty and sought to provide relief, not by extending the 1982 rebasing, but in a different way.
We have considered the matter and although it would be possible to devise rules to give the full benefit of rebasing in the more complicated cases where records are still available, those rules would be highly complex and would impose considerable costs on the Revenue, the taxpayers and their advisers. Such rules would be wholly impracticable if complete records had not been retained. Accordingly, rebasing would not be possible in the more complicated cases.
4.30 pm
Effectively, the choice was between giving the benefit of rebasing in cases where the computations can be done with an arbitrary solution for the remainder, or an arbitrary approach across the board. However, having different rules for different groups of taxpayers would involve making unfair distinctions and would lead to anomalies. In principle, all taxpayers should be treated equally and on the same basis. As I have said, even where the precise calculations could be made, the costs of doing so would be high. For that reason, we concluded that the only solution which is both practicable and equitable is that there should be an arbitrary amount of relief in all cases. That is the approach that we have adopted in the new clause and schedule.
Broadly speaking, the provisions take the deferred gain that is now in charge and halve it where it can be established that part of the deferred gain results either directly or indirectly from the disposal of an asset that was acquired before 31 March 1982. In some cases—for example, where the first asset was acquired just before 1982 the relief is undoubtedly generous. In other cases—for example where the first asset was acquired many years ago—it is less generous. Therefore, I accept that the solution that we have adopted involves a degree of rough justice. However, for the reasons that I have outlined, the only alternative was to provide no relief in those circumstances, and we received many representations on that point.
The most common provision under which tax can be deferred are the gifts and replacement of business asset reliefs. But other less common provisions also provide for tax deferral, such as equities being converted into corporate bonds. The relief that I have described will extend to those provisions as well and will be available where there has been a chain of deferrals. Like capital gains reform generally, the relief will apply to disposals on or after 6 April 1988 and will be subject to a claim. That is because the Inland Revenue will frequently be unable to identify the cases where it is due. The relief will probably cost under £50 million in a full year.
I recognise that the solution is a somewhat rough and ready one to the problems that have been identified. However, it does have some merit. Although there are arguments both ways, on balance the solution that we have adopted should be widely welcomed by those who have been affected.

Mr. Nicholas Brown: The Financial Secretary has treated the House to a candid review of the two options that the Government considered in some detail when looking at the requests that have been made to them for reform in this area. However, although he referred to it, he did not spend much time discussing the third option, which

was to do nothing and to leave the situation as it would have been without the new clause and accompanying schedule. That option was worthy of consideration.
The new clause and schedule relate to giving further relief from capital gains where deferred tax charges arise. However, the Financial Secretary did not put the emphasis on further relief but dealt with the detail, and I can understand why. Although the detail holds up to examination, the strategic approach does so to a lesser extent.
I do not want to go over the areas that the Financial Secretary covered in great depth but, as he explained, deferred charges arise in broadly two circumstances. The first is where deferral is allowed on an earlier disposal by one person, but where the cost of the asset to a successor or the cost of another asset to that person is correspondingly reduced. The second is under relieving provision where what would otherwise be a gain on a disposal is instead a charge on a subsequent event.
Before setting the latest concession and generosity to capital gains tax payers in its proper context, I should like to raise some points of detail with the Financial Secretary. The first is the obvious one. The Red Book estimate does not allow for the cost of the amendments that the Government are proposing, although there must be some cost. When the Financial Secretary replies to the debate, will he tell us his estimate of the cost to the Revenue of making that concession, if he believes that there will be such a cost? I believe that there must be a cost. If there are no such estimates, how does the Financial Secretary account for that?
My second point goes right to the heart of the Financial Secretary's explanation and relates to the arbitrary nature of the proposals. We accept that the cut-off point in the existing legislation is somewhat arbitrary, but that is inevitable. There will always be people who could have taken advantage of taxation changes if they had known about them. That would be the case under any taxation system and indeed it would not be possible to devise a taxation system where that would not arise. However, that does not necessarily mean that any group of people who complain that they have been disadvantaged should be able to ask for a concession, yet that is what has happened in this case.
The method of relief itself is entirely arbitrary. Although an asset to be disposed of may have only one day's worth of pre-March 1982 deferred gain—that is an extreme example, but it is possible—half the gain would be untaxed, and that is on top of the indexation and annual expenditure. Giving what amounts to 50 per cent. relief of gains on rolled-over business assets could weaken the incentive to reinvest in order to get the deferral. That is another criticism of the scheme and is a point to which the Financial Secretary should respond.
There is a strategic context to the current concession which really upsets the Opposition. I am sure that the Financial Secretary is not surprised about that. Capital gains stand at record levels, yet the number of people who are paying capital gains tax has decreased from 225,000 in 1978–79 to only 120,000 in 1983–84. Funnily enough, that is the latest year for which the figures are available for comparison. That decline is significant, yet those 120,000 people—the number may be smaller now—are to be given a further concession to help them to maximise their existing advantages in relation to the taxman.
In the past year, rich taxpayers saved themselves £1·2 billion in capital gains tax. That is enough to make a substantial impact on, to take an obvious example, hospital revitalisation, or on all the areas of public expenditure to which the parliamentary Labour party is so committed, and the interests of which the Government always seem to discount.
The top rate taxpayer has probably saved some £25,000 cumulatively in capital gains tax since 1979. That concession is not going to those who most need it; it is going to those who least need it. The Opposition stand firmly against that approach. That theme has underlined each of our debates on the Finance Bill, and was carried through Second Reading.
Treasury Ministers have omitted to mention that the Budget measures will reduce the capital gains tax paid by top rate taxpayers by some £50 million in 1988–89. The Labour party cannot support such a loss of revenue.

Mr. Phillip Oppenheim: Top rate taxpayers will pay more.

Mr. Brown: I understand the sedentary intervention from the Conservative Benches, but the argument is between expenditure on public services, to which the Labour party is committed, and concessions to top rate taxpayers to which the Conservative party and the Government are still more committed. That issue divides us and goes to the heart of the debate.
Because of the definition of the tax, there can be no poor capital gains tax payers. Conservative Members seem to find that an astounding premise.

Mr. Quentin Davies: I am grateful to the hon. Gentleman for giving way. I wonder if I heard him correctly. Did he speak about the reduction in the rate of capital gains tax applied to top rate taxpayers? If he did, he has missed the point completely. The rate of capital gains tax that applies to top rate taxpayers is now the top rate income tax—40 per cent.—it has gone up, not down. It seems that the last five minutes of the hon. Gentleman's speech has been completely irrelevant.

Mr. Brown: The hon. Gentleman has misunderstood me. I am talking about the take from capital gains tax as a result of the new clause. [Interruption.] I have received some very good advice from the Conservative Back Benches, which is to ignore the interventions of other Conservative Members. That is probably right. Perhaps Conservative Members are motivated by some deep personal resentment that they will not be able to take maximum advantage of the concession. If that was an unworthy remark, of course I withdraw it.
Despite unheard-of capital gains, the City of London is paying less than it should pay in capital gains tax, because of bed and breakfasting. The Exchequer is undoubtedly losing hundreds of millions of pounds because of bed and breakfasting. When we last debated this matter on the Floor of the House, the Financial Secretary said that he rather approved of bed and breakfasting and that he was not proposing measures that would stop bed and breakfasting as a taxation loophole. I do not know whether the Government's position on that has changed.
In the endeavour to put forward a constructive alternative to how the Government should spend the

money that they will put into quite an important concession, I shall treat the House to the results of a parliamentary question which I put to the Secretary of State for Social Services. I asked whether he would publish tables showing the expenditure and benefit figures relating to poor families in Kensington—to take an area at random. I notice that the Chief Secretary to the Treasury has perked up. At last I have caught his interest.
The figures reveal that, contrary to the Government's assertions, the poorest households in Kensington will be net losers under the new benefit system introduced in April. They show the weekly spending power of families on low wages after tax and benefits as it would have been under the 1987–88 benefit system, if it had been maintained and updated in line with inflation, compared with what it will be under the new system. The figures are a shoddy contrast with the generosity of the Government's approach to those who pay capital gains tax. I understand that Conservative Members do not like a parallel to be drawn between those who will be advantaged under capital gains tax changes proposals and those who will be impoverished under the Government's social security proposals in Kensington and elsewhere.
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The theme of the Opposition's approach to the Budget, from Second Reading onwards, was that the Budget had a context. We hope to bring home that context to the country, although we realise that we will not change the Government's attitude. The figures—and they are the Government's figures—show that in Kensington a married couple with two children will be worse off if they are on wages between £70 and £110 a week. They will lose up to £1·95 a week. They will not be recipients of the Government's generosity to capital gains taxpayers.
Nor will a lone parent with two children, who stands to lose up to one tenth of his or her weekly earnings—if he or she is earning between £60 and £170 a week—as a result of the Government's benefit changes. All the one-parent families shown in the tables are net losers, losing between £2 and £8·79 a week. Those figures underestimate the loss that many families will suffer, as they do not take into account average water rates of about £1·78 a week which are no longer covered by housing benefit.
Those people do not pay capital gains tax and they will not benefit from the Government's new clause. They represent the generality of the population, rather than the 120,000 privileged few, who are privileged to have the capital gains in the first place and privileged to be able to take advantage of the new loopholes. That is what the Government are all about—capital gains tax concessions for the rich and benefit losses for the poor, particularly the poor in Kensington.

Mr. Tim Smith: I listened with great care to the speech of the hon. Member for Newcastle upon Tyne, East (Mr. Brown), but I could not follow what relevance much of it had to new clause 23.

Ms. Marjorie Mowlam: That is because the hon. Gentleman was not listening.

Mr. Smith: I have just said that I listened with great care. Clearly, the hon. Lady is not listening. I did not see what relevance the hon. Gentleman's speech had to new clause 23, which is entitled
Deferred charges on gains before 31st March 1982".

Mr. Nicholas Brown: Will the hon. Gentleman give way?

Mr. Smith: I shall give way to the hon. Gentleman in a moment, but first I should like to deal with some of the points that he raised. He referred to the fact that the number of capital gains tax payers had fallen in the past 10 years. Contrary to what he was suggesting, many people under the last Labour Government who were by no means wealthy had to pay capital gains tax. One of the welcome changes that the Government have made is to increase the threshold substantially to a level of £5,000 a year, which has reduced the number of capital gains tax payers but has not made a significant change to the yield from capital gains tax, which is still very substantial, and certainly will be next year, with the new 40 per cent. rate.
In regard to the change proposed in new clause 23, the hon. Gentleman suggested that it might be possible for a person to have held an asset for only one day before 31 March 1982. That is true, but it is equally true that a person might have held an asset for 17 years before that date. As I pointed out during our debate in Committee, the injustice of the previous situation was underlined by the fact that, during that 17-year period, inflation was 450 per cent. Many people were required to pay tax on gains that were not real. They were totally inflationary. A total of 450 per cent. had to be discounted from any gain before getting to the real element. I recall the debate when my hon. Friends the Members for Croydon, South (Sir W. Clark) and for Bournemouth, West (Mr. Butterfill) raised that point.
My right hon. Friend the Financial Secretary put forward a balanced view. He dealt with the merits of the argument, which is not entirely on one side. I understand the point he made about the fact that some people did not defer their gain and realised their asset before 1988. They could argue that they had been placed at a disadvantage. Everybody must recognise that, however they plan their tax affairs—they may take the best advice—they may be disadvantaged by changes in the net Budget.
There is a strong case for making a change and I congratulate my right hon. Friend the Financial Secretary on the formula he has suggested. As he said, there seems to be an element of rough justice in this. I can see that in the absence of satisfactory records that has to be the case. Although it is only a short time since the Inland Revenue published a press release on the subject—I think it was on Friday—I have had a response from one tax partner in Deloitte Haskins and Sells. He said:
So far as roll over relief is concerned, the news is excellent and I think that the Government have devised a very equitable and practical way of dealing with a difficult problem.
He said that he felt that in the case of holdover relief it might be possible to go a little further because usually only one asset is involved. However, my right hon. Friend said that even there, the records might not be available. I can see that this is the best solution in both cases and I welcome the new clause.

Mr. Nigel Griffiths: We are entitled to know what the cost of the new measure will be to the community and other taxpayers who are paying ordinary rates of taxation. The Financial Secretary gave a figure of £50 million. That is in addition to the sum already prised from him on 18 December in response to a question from my hon. Friend the Member for Dunfermline, East (Mr.

Brown). It appears that the Government estimate that since 1979 the community has already lost £1·2 billion in capital gains tax and an additional £250 million has been forfeited by the Treasury in relaxations in capital transfer tax and inheritance tax. It is possible that the top 5 per cent. of taxpayers have enjoyed cumulative gains of about £25,000 each in the decade from such changes.
What is more disturbing is the evidence that the Government, in their headlong drive to reward the rich, have not included the cost of the Budget proposals to reduce capital gains tax in this financial year in the financial statement published in March. On 9 May the Financial Secretary said:
it is estimated that under the Budget proposals the reduction in capital gains tax on gains realised in 1988–89 by the top 5 per cent. of income tax payers will be rather less than £50 million."—[Official Report, 9 May 1988; Vol. 133, c. 30]
Page 40 of the Red Book shows that no such figure is included. It is incumbent on the Financial Secretary to explain that to us.
We also know from what the Financial Secretary has told us that a further £50 million is now to be sacrificed by the wider community to bring relief to the undeserving rich. It is a matter of concern to everybody that the new clause will give a further perk to the most wealthy. We know that the Chancellor has estimated that British people today can receive £1 million salaries and that by tax management, which involves, according to another answer, a mortgage of £30,000, a business expansion scheme investment of £40,000, an investment of £810,000 in the new enterprise zone unit trusts and a contribution to a retirement annuity scheme of £195,000, they can pay nothing in tax. Against that background it is inexplicable how a further new clause can be introduced which will give further handouts to the rich.
Already this year, following the Budget, £1·5 billion is being lost to the Exchequer in top rate tax allowances for the rich and a further £2 billion is being lost by Budget handouts to the top 1 per cent. of earners. We are entitled to a better justification from the Government than that given today. We are entitled to have the questions asked by my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) answered in full by the Financial Secretary. We deserve a proper explanation and I hope that the Government will consider withdrawing new clause 23.

Mr. Oppenheim: My right hon. Friend the Financial Secretary said that disallowing relief to people who had amassed pre-1982 gains but rolled those over into another asset was rough justice. I should like to go a stage further and say that it is very rough justice. Many people rolled over their assets through no fault of their own but because they were forced to do so, perhaps under threat of compulsory purchase or because their property had been compulsorily purchased. If it is technically possible to allow 50 per cent. relief against pre-1982 gains on the rolled-over assets, why is it not possible to allow 100 per cent. relief? I do not see what the technical or administrative difference is.
The Opposition Front Bench spokesman, the hon. Member for Newcastle upon Tyne, East (Mr. Brown), calls this clause a tax concession for the rich. I invite the hon. Gentleman to come to my constituency. He will be made most welcome. I will introduce him to a gentleman who will be surprised to hear himself called rich or super rich. He is a very small dairy farmer who is farming over


the border of my constituency in Nottinghamshire. He was under threat of compulsory purchase by British Coal some years ago because it wanted to grab his land for opencast mining. He was forced to sell it to British Coal on disadvantageous terms. He rolled that money over into a new farm.
He is far from being rich. He does not drive a Range Rover, wear a huskie or green wellington boots. He is being severely disadvantaged by the fact that his pre-1982 gains are being allowed relief at 50 per cent. If the hon. Member for Newcastle upon Tyne, East would care to see me in the Lobby afterwards we can make a date. I shall buy him half a lager and he can explain to that gentleman why he regards him as rich. He will probably receive a dusty response.

Mr. Nicholas Brown: I accept the hon. Gentleman's invitation. I should love to visit his constituency and his constituents and meet the dairy farmer to whom he referred. Perhaps at the same time we could have discussions about everything the Government have done for dairy farmers.

Mr. Oppenheim: I am glad that the hon. Gentleman has graciously accepted my invitation. He will be made welcome. Perhaps we can liaise afterwards.
It is worth mentioning that, although there has been criticism and talk about the Government cutting tax for top rate taxpayers, it is worth remembering that the corollary of that is not only that they have wiped out a lot of perks that wealthier people used to enjoy, but top rate taxpayers will be paying more capital gains because they will pay capital gains on the same band as their income tax. Many people will be paying 40 per cent. capital gains instead of 30 per cent. Therefore, many people whom Opposition Members do not like—the rich and super-rich—will be paying more in capital gains. It is worth recognising that fact, because I suspect that that is in line with Labour's philosophy.
I understand that the Government's objective in banding capital gains with income tax rates is to prevent distortions. I put it to my right hon. Friend that there are still distortions. If one makes a capital loss on a bond but makes a profit from the income of that bond, one cannot be offset against the other. Therefore, it is at least debatable that there is still a distortion in the system. I ask my right hon. Friend to address himself to that point.
I am conscious that I have already taken up enough of the time of the House and that I have to make extensive arrangements for the official reception in my constituency of the hon. Member for Newcastle upon Tyne, East, so I shall pause in my oration.

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Mr. Archy Kirkwood: I apologise in advance for my ignorance. I did not serve on the Committee, so I am coming fresh to some of the arguments.
First, I reiterate the plea for more information from the Treasury about the cost implications of the concession, because that is important. If it is true that the Red Book guidelines do not reflect any charge, expenditure or change in the Government's Budget proposals as a result of this concession, that would certainly be important. My view of

the new clause is not based on the principle; it is a question of balance and fine tuning. The amounts of money involved are an important factor in deciding whether the Government's judgment is right.
Some of the comments made by Labour Members cause me concern. From my experience in my constituency, I know that small business men and farmers have been severely prejudiced by previous provisions. The Minister may help the House if he can tell us whether he has received any proposals from the small business community and whether any farming institutions have made representations to him.
The Government's policies on farming—and particularly cereal farming—have required family farmers to make decisions about the disposal of their farms. I am sure that dairy farmers in Amber Valley are in the same position. Perhaps we should organise a bus run and the hon. Member for Amber Valley (Mr. Oppenheim) can buy us all half pints of lager. Perhaps we should all go to study the effects of Government policy on farmers.
Can the Minister give us a little more objective information about the people who will receive the concessions? Will they be people who could afford to pay, or will they be people who should benefit from the concessions? Is there a wider implication for small business men and farmers?
Capital taxation is not as important as direct and indirect taxation. Labour Members properly argue for a redistribution of wealth. However, the redistribution of wealth should be tackled by direct and indirect taxation. Capital taxation, if it is organised properly, should be part of the wealth-creating process. I should be grateful if the Minister would clarify some of those points. His answers will influence me in deciding whether to support the new clause.

Mr. Alistair Darling: We shall wait with interest to see what the Social and Liberal Democrats will do. We shall be waiting with bated breath. I am also interested that the trip being arranged by the hon. Member for Amber Valley (Mr. Oppenheim) is gathering support. Perhaps we should all go, suitably fortified by a half pint of lager, to see the plight of the unfortunate farmer.
When the new clause was tabled we debated why it was necessary and desirable to wipe out gains made before 1982. The Government told us that there was an element of rough justice and that it was an arbitrary date. They said that it was difficult to find records before 1982, and apparently records could be found after that. They gave no satisfactory answer. The Opposition were left with the impression that the Government simply wanted to lift the burden from those who would have been liable to pay capital gains tax. Many people have made gains that were not accounted for because of inflation prior to 1982 and will receive great benefits under the proposals.
I disagree with the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) in his assessment of the importance of capital taxation. It is very important, and the longer the Government remain in office, the more important it will be. There is no doubt that the amassing of capital and the building of capital will play an important part in the assembling of wealth, and we shall have to consider that.
At first sight, new clause 23 does not generate much excitement. We had rehearsed in Committee all the


arguments about why we thought that the proposals were bad, both because of the amount of tax forgone, which could have been better spent on the Health Service and because they were indicative of the Government's general policy to help the wealthy. I accept that there are many people who pay capital gains whom one would not call very wealthy or even wealthy. However, the main thrust of the Bill is to help those who are better off. That contrasts dramatically with the Government's attitude to those who receive social security and those on low incomes or with no income at all, whom they do not seem to accommodate in the same way.
I have two questions for the Financial Secretary. First there is always an element of rough justice in fiscal changes, but why did the Government decide to benefit those who, by definition, have had a tax advantage some time ago? As I understand it, people who took advantage of rollover relief some time after 1982 on a gain incurred prior to 1982 will now receive the added bonus of a 50 per cent. exemption. They have already taken advantage of a tax break by getting rollover relief. Why are the Government helping those people any more than those unfortunate enough to have given away their asset before 1988—they may have divested themselves of an asset to a relative or sold it—without the benefit of rollover relief and who have to pay capital gains tax?
The Financial Secretary to the Treasury knows of a constituent of mine, who is a doctor, who gave away an asset in 1985. I expect that he will want to know why he will not get the benefit of any favours. I made no bones about the fact that I was not particularly sympathetic to him, and that I do not like retrospective legislation in principle—although I accept that it is occasionally necessary in special circumstances. Why do the Government seek to help people who have already taken advantage of a tax break? If rollover relief was designed to ease the tax burden, that should have been enough in itself. Why do the Government propose to reduce capital gains tax in such cases by half?
There is the added point that the gain prior to 1982 could have been a minuscule part of the whole gain. Someone may have acquired the asset a few weeks or months before the 1982 cut-off date. Why should such people be able to take advantage of the whole reduction?
I shall quote example 4 in the Treasury press release to illustrate my argument:
1980 Taxpayer A acquires a business asset
1983 A replaces the asset and claims deferral under Section 115 Capital Gains Tax Act 1979.
1987 The replacement asset is given to B, and deferral is claimed under Section 79 Finance Act 1980.
 1989 B emigrates"—
no doubt to sunnier climes—
and the gain deferred in 1987 is brought into charge under Section 79 Finance Act 1981.>
The gain deferred in 1987 is in part attributable indirectly to the disposal by A in 1983 of an asset which A acquired before 31 March 1982.
The point is that this particular taxpayer has already on two occasions taken advantage of existing legislation to mitigate the amount of tax that he had to pay. It is now proposed that he should have an added advantage. That is all very well and I do not begrudge anybody who is fortunate enough to be in that position that advantage, but it contrasts with the shameful treatment meted out to other taxpayers and others in receipt of money from the state.
Such a concession is not granted on social security matters or to ordinary basic rate taxpayers, who have been

hard hit. It is only this special category who receive this advantage, and I suspect that a great deal of lobbying has been done on their behalf by professionals and accountants. It is unfair, but rather typical of the way that the Government have dealt with the Finance Bill. They bend over backwards to help people who, generally speaking, are not in need of the same degree of help as those who have fallen on the wrong side of the Government's fence.
I hope that the Financial Secretary will tell us why people who have already been catered for are being catered for again. Can he say whether in future the Government will be so charitable to those who so far have felt nothing but the wrong side of the Government's hand in terms of their tax treatment?

Mr. Norman Lamont: The hon. Member for Newcastle upon Tyne, East (Mr. Brown) said that we had not considered seriously enough another option, which was to do nothing. Perhaps I did not make the case clear enough: that would have been wrong in terms of justice. We have said that we think it wrong that people should be paying capital gains tax on highly inflationary gains made in the 1970s, which is why we introduced rebasing. Once we introduced that, it was logical to extend something similar to people who are deferring capital gains.
Deferral is a long-standing system, not a tax dodge as the hon. Member for Edinburgh, Central (Mr. Darling) seems to think. People defer tax, but must ultimately pay it. If within that rolled-over or deferred gain there is an element of inflationary gain, that is pre-1982. Given that we have already decided that we would do something about the pre-1982 gain, there is obviously a case for considering this for the rolled-over or deferred gain.
I shall come to the details shortly. Part of this applies to businesses. This is a normal commercial transaction and it has been allowed in the tax system for a long time. It follows logically that if one is to rebase, one should look at the case for doing it with rolled-over gains as well.

Mr. Darling: I did not say that this was a tax dodge and I do not remember using those words. But without doubt it is a concession and an advantage not to have to pay capital gains tax when it would otherwise fall. That advantage is rollover relief, which both parties supported; that having been given, why is a further benefit to be given?

Mr. Lamont: Rollover relief, which is a long-standing feature of the CGT system, applies in carefully defined circumstances. It applies to businesses, but not to equity investment—I think rightly, although I have not managed to convince all my hon. Friends of that. Once there is rollover relief and if one is to give a degree of remedy for inflationary gain in the normal taxation of capital gains, obviously one should also consider the position of deferred gains.
The hon. Member for Newcastle upon Tyne, East ignored some recent developments and Budget provisions. He ignored the fact that we have increased CGT for higher rate taxpayers to 40 per cent. and that the threshold for capital gains is to be reduced to £5,000. I know that Opposition Members think that that is far too generous. Earlier they made it clear that they wanted to abolish the exemption completely and to bring 10 million people into CGT for the first time. They do not seem to know that one


third of CGT payers are basic rate payers. They are not the super-rich who seem so to obsess the hon. Member for Wrexham (Dr. Marek).
Some Opposition Members seem to think that the CGT yield is declining, but the opposite is true. The yield has increased four times since 1979. We are moving into a fairer world in which people are prepared to unlock their assets and pay tax. That is why the yield from all capital taxes has increased under this Government, unlike what happened under the Labour Government with their punitive rates on other capital taxes. The take from CGT is £2 billion a year—just enough to pay for the increases in social security, which hon. Gentlemen somewhat irrelevantly but consistently mentioned.
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Hon. Gentlemen asked about the cost. I said that the cost of the concession might be £50 million, of which £20 million would go to companies. There is no mystery about it not being in the Red Book. It was in the press release and in the notes on clauses that I made available and about which I wrote to the hon. Member for Dunfermline, East (Mr. Brown).

Mr. Nicholas Brown: I know that the Minister will tell us what the overall cost to the Exchequer will be more definitively and I am enjoying his rumbustious speech, as always. But he is misrepresenting the Labour party's position when he refers to abolishing thresholds entirely. That is not our position.

Mr. Lamont: That is what appeared to be said when we debated this subject on the Floor of the House.

Mr. Nicholas Brown: This argument has been made mischievously and I am sure in a light-hearted vein from the Government Front Bench before. It was put to the Minister as a possible option which the Government should have considered. It most certainly was not put to him as a final and definitive statement of our policy.

Mr. Lamont: As I understand it, the hon. Gentleman is not saying that the Labour party is definitely committed to bringing an extra 10 million people into CGT, but it is considering that seriously and will get its policy review to study it.
My hon. Friend the Member for Amber Valley (Mr. Oppenheim) thought that perhaps this was too rough justice. His argument was: if we could have 50 per cent. relief, what was the technical difficulty about having 100 per cent. relief? There is no technical difficulty. It is just that it would be inappropriate. The alternative to 50 per cent. is not 100 per cent. It is to give a separate concession to those with precise records. I explained carefully and at length why that was not possible. I repeat that although we have decided to make this concession, I strongly believe that this is a matter of balance. The case is not overwhelming.
Some people are receiving a retrospective benefit which they did not expect when their gains were established perhaps some time ago. For some this will be more advantageous and for others it will be disadvantageous. If we ran two systems and allowed people to choose between what we are proposing and another system, where perhaps those with precise records could choose, it would

undoubtedly be a one-way bet and those for whom the concession was in a sense over-generous would certainly make their decisions that way.
My hon. Friend the Member for Amber Valley raised the subject of rollover relief coming from compulsory purchase. One must be sympathetic to that. I see his point, but we could not run a different system for different types of capital gains. In any case, even with something that arose from compulsory purchase, the same problems of trying to apportion the gain before and after 1982 would still arise, and there might be a complicated interaction, with the proceeds of the compulsory purchase going into different assets. It would not be easy.
My hon. Friend also referred to losses on the sale of bonds not being offsetable against income from bonds. That is true. Leaving aside the general issue of allowing capital losses against income, which would be expensive and which we have always resisted—it would run into billions of pounds—my hon. Friend will be aware that bonds are generally outside the CGT net altogether. One of the effects of this concession will be to allow rollover relief into convertibles. I stress to my hon. Friend that we are not integrating income tax and capital gains tax. We have aligned the rates, but we are not moving towards complete integration of the two taxes.

Mr. Oppenheim: I may be wrong, but I had understood that most types of gilts were outside the capital gains net; but other types of bonds, such as Eurobonds and a variety of other fixed interest instruments, would come within the net. I did not mention gilts; I specifically mentioned bonds for that reason.

Mr. Lamont: The concession goes beyond gilts. If my hon. Friend wants me to be more precise about that, I shall have to let him have further details later.
Although this solution is somewhat rough and ready, we have addressed a real problem. When people have given gifts with deferred and accrued gains, or when they have rolled over assets, it is right that there should be some relief for them against inflationary gains, just as we have introduced that for taxpayers generally for pre-1982 inflationary gains. I cannot see why the Opposition should regard that as so unjust. It follows from what we put forward in the original Budget measures. I believe it will be widely welcomed, especially by the business community.
I have given the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) the figure for businesses, but I cannot give him the figure for small businesses. I invite my right hon. and hon. Friends to support the new clause.

Dr. Marek: It was refreshing to hear the Financial Secretary giving a balanced view of the new clause and being honest about what he thought of it. He said that there were arguments in both directions but that he was persuaded by the arguments and representations that had been made to him. It will come as no surprise to him to learn that, having listened to the arguments from Conservative Members and others, we have come to the conclusion that, on balance, the new clause should not be part of the Bill.
I listened to the Financial Secretary seriously and with interest. It is a surprise to hear his hon. Friends on the Back Benches, who always seem to be pleading special cases, probably on behalf of clients sitting in the Gallery. The Register of Members' interests shows that the hon.


Member for Amber Valley (Mr. Oppenheim) has two directorships—of What to Buy plc and of World Opinion Ltd. Presumably he will not recommend that his clients buy farm land.
The hon. Member for Beaconsfield (Mr. Smith) also spoke. I see that he is a consultant to Price Waterhouse, Accountancy Age, the Financial Intermediaries, Managers and Brokers Regulatory Association, Rediffusion Business Electronics Ltd. and British Venture Capital Association. I make no complaint about that. I just wonder whether the sort of people to whom he is a consultant have an interest in the new clause being passed and in the gains that they would make if it were.
The Register of Members' Interests can be referred to by any hon. Member. It is possible to question whether the hon. Member for Beaconsfield speaks from the heart and really believes what he says or whether, given that in another walk of life he advises people how to avoid paying tax, he sees an opportunity here to please his clients.

Mr. Oppenheim: It is comforting to think that the hon. Gentleman has gone to the trouble of doing some research into my business background. It is a shame that his research was not more thorough. If he had done it properly he would have discovered that What to Buy put out a publication that looks into office equipment and information technology—so it is highly unlikely that it would recommend that its subscribers buy farmland.

Dr. Marek: I am pleased to hear that. My research was done quickly by consulting the Register of Members' Interests that lies on the Table. No doubt the hon. Gentleman will enter his directorships and consultancies in it so that we can have a better idea of them when he rises in future debates on financial matters.
When Conservative Back Benchers talk about avoiding distortions of the tax system I get the message that they regard paying any tax as a distortion. If their supporters could pay no tax there would be no distortion. My hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) gave the numbers of capital gains tax payers, I believe for 1983–84, when there were 120,000 of them. They are the better-off people in society. Many of my constituents would not know what capital gains were, let alone have to pay tax on them. A small band of privileged people exercise their patronage through their power, wealth and ability to make capital gains. No doubt they see their interests clearly and will write to the Financial Secretary about them.

Mr. Norman Lamont: Are the one third of capital gains tax payers who pay tax at the basic rate an exception to what the hon. Gentleman is saying?

Dr. Marek: I shall make that clear later. [Interruption.] If the hon. Member for Beaconsfield can contain himself until then, I shall deal with that point later. Of course, capital gains tax can be paid by people who are only moderately wealthy, but it is also paid by the super-rich. There are cases such as that mentioned by the hon. Member for Amber Valley in which a person is genuinely hard done by because of forces outside of his or her control. In that case British Coal wanted to buy the land and the person, although he wanted to, could not continue farming. There are such cases, but the solution does not lie in what the Government propose. The solution is to deal

with the problem of enabling people to pass down businesses. The Government should have turned their attention to that.
There are problems in firming and they should be solved by the Government turning their attention to enabling farmers to pass on their farms as working concerns to other people without having to leave the industry or being penalised any more than they should be by capital gains tax.
I agree with my hon. Friend the Member far Edinburgh, Central (Mr. Darling) that people should pay capital gains tax if they make capital gains, and that is the central point. The problem with the clause is that the Government decided to rebase the gains and to give a tax giveaway to the rich, but missed out some of the rich. Those whom they missed out wrote to the Financial Secretary and said, "Look here, what is going on? Your are giving all these people, because of rebasing—never mind whether it is because of inflation—a tax handout that you are not giving me." I give the Government their due; they recognise their own. The Financial Secretary immediately took it to heart and said, "Yes, there must be more pig swill in the troughs so that everyone can put their snouts into it." That is precisely what they have done.

Mr. Tim Smith: The hon. Gentleman can do better than this.

Dr. Marek: I will. I am being objective.
When an error was discovered in the figures for pension payments, an error that resulted in pensioners not receiving—[Interruption.] Having lost the argument, Tory Members are not able to come back with any genuine point on what I am saying and instead are diverting the attention of the House by making irrelevant comments. I wish they would not.
When the Government made a mistake in the pension payment figures and were underpaying pensioners by about £1 million a year, did they increase the pension for those who had lost money because of that error?

Mr. Neil Hamilton: Boring.

Dr. Marek: It may be boring for the hon. Gentleman, but it was not for the pensioners who lost money because of that error. I accept that that error was not made deliberately. However, instead of giving the money back to the pensioners and putting up the pensions by 0·1 per cent. or 0·2 per cent. above the usual uprating, the Government gave that money to charity.
That treatment of ordinary working men and women was completely different from the treatment given to people who make capital gains and pay capital gains tax. If people are rich and pay capital gains tax, they expect and receive all the benefits and the attention of the Government to ensure that they do not go without anything that someone else already has. The Government are not especially interested in the ordinary person on the street, the pensioner or someone with not a great deal of money, so all they promised was that the money would be given to charity. They are not interested in increasing the pensions more than they have to.

Mr. Norman Lamont: Will the hon. Gentleman now answer my earlier question? Are the one third of capital gains taxpayers who are basic rate income taxpayers an exception to the remarks that he is making?

Dr. Marek: Only the top 5 per cent. of taxpayers pay the top rate of income tax, so not many people will pay 40p in the pound. It is precisely those people about whom I am talking—those who are rich and have far more wealth, patronage and power than the ordinary man in the street and more money than almost all of my constituents even dream about. That is a clear answer to the Financial Secretary's question.
The Opposition are not enamoured of the new clause. We believe that it is yet another concession of £50 million or £20 million, or whatever the Financial Secretary said. I have forgotten now, but I will read it in the Official Report tomorrow. That money could have been given to renovating our schools, to funding fully the nurses' pay award, to getting our infrastructure into better shape, to building our roads or railways, to building more hospitals or to almost any other sphere of public life that desperately needs more money. Instead, the Government have chosen to give it to the rich who have already been given more money than ever before. We cannot support the new clause and I urge my right hon. and hon. Friends to vote against it.

Question put, That the clause be read a Second time:—

The House divided: Ayes 287, Noes 173.

Division No. 40]
[5.35 pm


AYES


Alexander, Richard
Burt, Alistair


Alison, Rt Hon Michael
Butcher, John


Allason, Rupert
Butler, Chris


Alton, David
Butterfill, John


Amess, David
Campbell, Menzies (Fife NE)


Amos, Alan
Carlisle, John, (Luton N)


Arbuthnot, James
Carrington, Matthew


Arnold, Jacques (Gravesham)
Carttiss, Michael


Ashby, David
Cash, William


Atkins, Robert
Chapman, Sydney


Atkinson, David
Clark, Hon Alan (Plym'th S'n)


Baker, Rt Hon K. (Mole Valley)
Clark, Dr Michael (Rochford)


Baldry, Tony
Clark, Sir W. (Croydon S)


Batiste, Spencer
Clarke, Rt Hon K. (Rushcliffe)


Beaumont-Dark, Anthony
Colvin, Michael


Beggs, Roy
Coombs, Anthony (Wyre F'rest)


Bellingham, Henry
Coombs, Simon (Swindon)


Bendall, Vivian
Cope, Rt Hon John


Bennett, Nicholas (Pembroke)
Couchman, James


Bevan, David Gilroy
Cran, James


Biffen, Rt Hon John
Critchley, Julian


Biggs-Davison, Sir John
Currie, Mrs Edwina


Blaker, Rt Hon Sir Peter
Curry, David


Body, Sir Richard
Davies, Q. (Stamf'd &amp; Spald'g)


Boscawen, Hon Robert
Davis, David (Boothferry)


Bottomley, Peter
Day, Stephen


Bottomley, Mrs Virginia
Dickens, Geoffrey


Bowden, A (Brighton K'pto'n)
Dicks, Terry


Bowden, Gerald (Dulwich)
Dorrell, Stephen


Bowis, John
Douglas-Hamilton, Lord James


Boyson, Rt Hon Dr Sir Rhodes
Durant, Tony


Braine, Rt Hon Sir Bernard
Dykes, Hugh


Brandon-Bravo, Martin
Eggar, Tim


Brazier, Julian
Emery, Sir Peter


Bright, Graham
Evans, David (Welwyn Hatf'd)


Brittan, Rt Hon Leon
Evennett, David


Brooke, Rt Hon Peter
Ewing, Mrs Margaret (Moray)


Brown, Michael (Brigg &amp; Cl't's)
Fallon, Michael


Browne, John (Winchester)
Favell, Tony


Buck, Sir Antony
Fenner, Dame Peggy


Burns, Simon
Finsberg, Sir Geoffrey





Fookes, Miss Janet
Marshall, John (Hendon S)


Forman, Nigel
Marshall, Michael (Arundel)


Forsyth, Michael (Stirling)
Martin, David (Portsmouth S)


Forth, Eric
Mates, Michael


Fowler, Rt Hon Norman
Maude, Hon Francis


Fox, Sir Marcus
Maxwell-Hyslop, Robin


Franks, Cecil
Meyer, Sir Anthony


Freeman, Roger
Michie, Mrs Ray (Arg'l &amp; Bute)


French, Douglas
Miller, Sir Hal


Fry, Peter
Mills, Iain


Gale, Roger
Miscampbell, Norman


Gardiner, George
Mitchell, Andrew (Gedling)


Garel-Jones, Tristan
Mitchell, David (Hants NW)


Gill, Christopher
Moate, Roger


Goodhart, Sir Philip
Monro, Sir Hector


Goodson-Wickes, Dr Charles
Montgomery, Sir Fergus


Gower, Sir Raymond
Morrison, Sir Charles


Greenway, Harry (Ealing N)
Moss, Malcolm


Greenway, John (Ryedale)
Mudd, David


Gregory, Conal
Neale, Gerrard


Griffiths, Sir Eldon (Bury St E')
Needham, Richard


Griffiths, Peter (Portsmouth N)
Nelson, Anthony


Grist, Ian
Neubert, Michael


Ground, Patrick
Nicholls, Patrick


Gummer, Rt Hon John Selwyn
Nicholson, David (Taunton)


Hamilton, Neil (Tatton)
Nicholson, Emma (Devon West)


Hanley, Jeremy
Onslow, Rt Hon Cranley


Hannam, John
Oppenheim, Phillip


Hargreaves, A. (B'ham H'll Gr')
Page, Richard


Hargreaves, Ken (Hyndburn)
Paice, James


Harris, David
Patnick, Irvine


Haselhurst, Alan
Patten, John (Oxford W)


Hayhoe, Rt Hon Sir Barney
Pawsey, James


Heathcoat-Amory, David
Peacock, Mrs Elizabeth


Hicks, Mrs Maureen (Wolv' NE)
Porter, David (Waveney)


Hicks, Robert (Cornwall SE)
Portillo, Michael


Higgins, Rt Hon Terence L.
Powell, William (Corby)


Hill, James
Price, Sir David


Hind, Kenneth
Raffan, Keith


Holt, Richard
Raison, Rt Hon Timothy


Hordern, Sir Peter
Rathbone, Tim


Howarth, G. (Cannock &amp; B'wd)
Redwood, John


Howell, Rt Hon David (G'dford)
Rhodes James, Robert


Howells, Geraint
Riddick, Graham


Hughes, Robert G. (Harrow W)
Ridley, Rt Hon Nicholas


Hunter, Andrew
Ridsdale, Sir Julian


Hurd, Rt Hon Douglas
Roberts, Wyn (Conwy)


Irvine, Michael
Roe, Mrs Marion


Irving, Charles
Rost, Peter


Jack, Michael
Rowe, Andrew


Jackson, Robert
Rumbold, Mrs Angela


Janman, Tim
Ryder, Richard


Johnson Smith, Sir Geoffrey
Sackville, Hon Tom


Johnston, Sir Russell
Sainsbury, Hon Tim


Jones, Gwilym (Cardiff N)
Salmond, Alex


Jones, Ieuan (Ynys Môn)
Sayeed, Jonathan


Jones, Robert B (Herts W)
Shaw, David (Dover)


Jopling, Rt Hon Michael
Shaw, Sir Giles (Pudsey)


Kellett-Bowman, Dame Elaine
Shaw, Sir Michael (Scarb')


Kennedy, Charles
Shelton, William (Streatham)


Key, Robert
Shephard, Mrs G. (Norfolk SW)


King, Roger (B'ham N'thfield)
Shepherd, Colin (Hereford)


Kirkwood, Archy
Shepherd, Richard (Aldridge)


Knapman, Roger
Shersby, Michael


Knight, Dame Jill (Edgbaston)
Sims, Roger


Knox, David
Skeet, Sir Trevor


Lamont, Rt Hon Norman
Smith, Sir Dudley (Warwick)


Lang, Ian
Smith, Tim (Beaconsfield)


Lawrence, Ivan
Soames, Hon Nicholas


Lightbown, David
Speed, Keith


Lilley, Peter
Speller, Tony


Livsey, Richard
Spicer, Michael (S Worcs)


Lloyd, Peter (Fareham)
Squire, Robin


McCrindle, Robert
Stanbrook, Ivor


MacGregor, Rt Hon John
Stanley, Rt Hon John


Maclean, David
Steel, Rt Hon David


Maclennan, Robert
Steen, Anthony


McLoughlin, Patrick
Stern, Michael


Major, Rt Hon John
Stevens, Lewis


Malins, Humfrey
Stewart, Allan (Eastwood)






Stewart, Andy (Sherwood)
Waller, Gary


Stokes, Sir John
Walters, Sir Dennis


Stradling Thomas, Sir John
Ward, John


Sumberg, David
Wardle, Charles (Bexhill)


Summerson, Hugo
Watts, John


Taylor, Ian (Esher)
Wells, Bowen


Taylor, John M (Solihull)
Welsh, Andrew (Angus E)


Taylor, Matthew (Truro)
Wheeler, John


Taylor, Teddy (S'end E)
Whitney, Ray


Tebbit, Rt Hon Norman
Widdecombe, Ann


Temple-Morris, Peter
Wiggin, Jerry


Thompson, Patrick (Norwich N)
Wigley, Dafydd


Thorne, Neil
Wilkinson, John


Thornton, Malcolm
Wilshire, David


Thurnham, Peter
Winterton, Mrs Ann


Townend, John (Bridlington)
Winterton, Nicholas


Townsend, Cyril D. (B'heath)
Wood, Timothy


Tracey, Richard
Woodcock, Mike


Trotter, Neville
Yeo, Tim


Twinn, Dr Ian
Young, Sir George (Acton)


Waddington, Rt Hon David



Wakeham, Rt Hon John
Tellers for the Ayes:


Walden, George
Mr. Mark Lennox-Boyd and Mr. Kenneth Carlisle.


Walker, Bill (T'side North)



Wallace, James





NOES


Adams, Allen (Paisley N)
Fields, Terry (L'pool B G'n)


Allen, Graham
Flannery, Martin


Armstrong, Hilary
Flynn, Paul


Ashley, Rt Hon Jack
Foot, Rt Hon Michael


Barnes, Harry (Derbyshire NE)
Foster, Derek


Barron, Kevin
Fyfe, Maria


Bell, Stuart
Galbraith, Sam


Benn, Rt Hon Tony
Garrett, John (Norwich South)


Bennett, A. F. (D'nt'n &amp; R'dish)
Garrett, Ted (Wallsend)


Boyes, Roland
Godman, Dr Norman A.


Bradley, Keith
Gould, Bryan


Bray, Dr Jeremy
Graham, Thomas


Brown, Gordon (D'mline E)
Grant, Bernie (Tottenham)


Brown, Nicholas (Newcastle E)
Griffiths, Nigel (Edinburgh S)


Buchan, Norman
Griffiths, Win (Bridgend)


Buckley, George J.
Grocott, Bruce


Caborn, Richard
Hardy, Peter


Callaghan, Jim
Harman, Ms Harriet


Campbell, Ron (Blyth Valley)
Hattersley, Rt Hon Roy


Campbell-Savours, D. N.
Healey, Rt Hon Denis


Canavan, Dennis
Heffer, Eric S.


Clark, Dr David (S Shields)
Henderson, Doug


Clarke, Tom (Monklands W)
Hinchliffe, David


Clay, Bob
Hogg, N. (C'nauld &amp; Kilsyth)


Clelland, David
Holland, Stuart


Clwyd, Mrs Ann
Home Robertson, John


Coleman, Donald
Hood, Jimmy


Cook, Frank (Stockton N)
Howarth, George (Knowsley N)


Cook, Robin (Livingston)
Howell, Rt Hon D. (S'heath)


Corbett, Robin
Hughes, John (Coventry NE)


Corbyn, Jeremy
Hughes, Roy (Newport E)


Cousins, Jim
Hughes, Sean (Knowsley S)


Cox, Tom
Illsley, Eric


Cryer, Bob
Ingram, Adam


Cummings, John
Janner, Greville


Cunliffe, Lawrence
John, Brynmor


Dalyell, Tam
Jones, Martyn (Clwyd S W)


Darling, Alistair
Kaufman, Rt Hon Gerald


Davies, Ron (Caerphilly)
Leighton, Ron


Davis, Terry (B'ham Hodge H'l)
Lestor, Joan (Eccles)


Dewar, Donald
Lewis, Terry


Dixon, Don
Litherland, Robert


Dobson, Frank
Lloyd, Tony (Stretford)


Doran, Frank
Lofthouse, Geoffrey


Duffy, A. E. P.
McAllion, John


Dunnachie, Jimmy
McAvoy, Thomas


Dunwoody, Hon Mrs Gwyneth
McCartney, Ian


Eastham, Ken
Macdonald, Calum A.


Evans, John (St Helens N)
McKay, Allen (Barnsley West)


Ewing, Harry (Falkirk E)
McKelvey, William


Fatchett, Derek
McLeish, Henry


Faulds, Andrew
McNamara, Kevin


Field, Frank (Birkenhead)
McTaggart, Bob





McWilliam, John
Rogers, Allan


Madden, Max
Rooker, Jeff


Mahon, Mrs Alice
Ross, Ernie (Dundee W)


Marek, Dr John
Rowlands, Ted


Marshall, David (Shettleston)
Sedgemore, Brian


Marshall, Jim (Leicester S)
Sheerman, Barry


Martin, Michael J. (Springburn)
Sheldon, Rt Hon Robert


Martlew, Eric
Short, Clare


Maxton, John
Skinner, Dennis


Meacher, Michael
Smith, Andrew (Oxford E)


Meale, Alan
Smith, C. (Isl'ton &amp; F'bury)


Michael, Alun
Snape, Peter


Michie, Bill (Sheffield Heeley)
Soley, Clive


Millan, Rt Hon Bruce
Steinberg, Gerry


Mitchell, Austin (G't Grimsby)
Stott, Roger


Morgan, Rhodri
Strang, Gavin


Morley, Elliott
Straw, Jack


Morris, Rt Hon A. (W'shawe)
Thompson, Jack (Wansbeck)


Morris, Rt Hon J. (Aberavon)
Turner, Dennis


Mowlam, Marjorie
Vaz, Keith


Mullin, Chris
Wall, Pat


Murphy, Paul
Wardell, Gareth (Gower)


O'Brien, William
Wareing, Robert N.


O'Neill, Martin
Welsh, Michael (Doncaster N)


Orme, Rt Hon Stanley
Williams, Rt Hon Alan


Parry, Robert
Williams, Alan W. (Carm'then)


Patchett, Terry
Wilson, Brian


Pike, Peter L.
Winnick, David


Powell, Ray (Ogmore)
Wise, Mrs Audrey


Prescott, John
Worthington, Tony


Primarolo, Dawn
Wray, Jimmy


Quin, Ms Joyce



Radice, Giles
Tellers for the Noes:


Reid, Dr John
Mrs. Llin Golding and Mr. Frank Haynes.


Richardson, Jo



Robertson, George

Question accordingly agreed to

Clause read a Second time, and added to the Bill.

New clause 3

INTEREST RATES

'In section 378 (3) (e) of the Taxes Act 1988 there shall be added at the end "and—(b) in particular for the publication of statistics on a monthly basis setting down prevailing levels of interest rates from a representative sample of market rates for mortgage lending, bank lending and other consumer credit".'.—[Mr. Chris Smith.]

Brought up, and read the First time.

Mr. Chris Smith: I beg to move, That the clause be read a Second time.
The new clause requires the Government to publish monthly comparative figures of the varying rates of credit available to consumers from mortgage lending institutions—building societies, banks and other finance institutions and stores. It is important for consumers to have access to the fullest possible, independently presented information about the rates of credit available to them. That is especially important in the present circumstances because of the enormous variation in the interest rates available for credit. I must pay tribute to my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley), who has already raised this issue in a Bill that he presented to the House.
The available rates of' credit show an enormous variation. An overdraft is available from the bank at between 14 and 17 per cent., plus bank charges. Personal loans may be available from a high street bank at between 19·5 and 20·75 per cent. Interest rates on Access and on Barclay's Visa cards range between 23 and 24 per cent.


annual percentage rate. The Chase Manhattan Visa card, which has recently been introduced, is somewhat cheaper, at 16·9 per cent. APR.
If one goes along to the gas board showroom in the high street and wishes to purchase an item on hire purchase credit, one will find that the rate varies between 30 and 35 per cent. APR. The higher figure is the one charged to cash customers, which is blatant discrimination against people who do not have bank accounts.
The rates available on different store cards vary even more dramatically. Yesterday, I carried out a random survey of store card and store credit rates of interest in an average British high street. Perhaps I should not call it an average British high street, as it was Kensington high street. I discovered that various rates of credit are available in the major stores there. At Dixons, they range from 29·8 to 39·9 per cent. and at Next from 26·8 to 32·9 per cent. At Marks and Spencer, the rate is 26·8 per cent. At Barkers, on the Frasercard system, the rate is 29·8 per cent. At BHS, the rate is between 29 and 34·7 per cent.
In that welter of available mainstream high street credit, there is surely a crucial need for information to enable consumers to make well-judged choices and decisions. That may be all very well for the high street stores, but the back-street loan sharks are infinitely worse. Last year, Birmingham city council and Birmingham money advice centre carried out a joint survey which found that annual percentage rates for the back-street merchants in their area ranged from 153 per cent. up to a staggering 4,822 per cent. They also found that one local firm, S and U Stores, told its customers that the APR on the credit that it made available was 54 per cent. That in itself would have been bad enough, but, when the collection charges that the borrower had to pay were included, the real cost of borrowing was 835 per cent.
There is not only an enormously wide variety in the rates of credit available, but far more credit is being offered to and thrust at the public than ever before. Outstanding consumer credit has risen by an average of about 15 per cent. a year over the past four years. Last year, to October, it was even worse. It rose by 18·7 per cent. and it is becoming worse still.

Mr. Tim Smith: Will the hon. Gentleman tell us whether those figures include credit advance for house purchase and, if so, what proportion that represents?

Mr. Chris Smith: They do and, of course, the mortgage finance available is a crucial component part. It accounts for about three quarters of the overall credit figures. That does not make the point any less valid because, to an increasing extent, people are borrowing money on mortgages against the value of their house and spending that money on items other than housing. That is borrowing against security, but it is borrowing none the less.
The amount of outstanding consumer credit is rising in real terms. It is rising on a per person basis and as a percentage of GDP. It is also worth pointing out that Britain makes far more use of credit cards than any other EEC country. In this country, we hold about half the Visa cards in the entire Community and two fifths of the Eurocards were issued in the United Kingdom.
The problem is further highlighted by yesterday's figures on bank lending which were issued by the Bank of England. They showed that lending in the personal sector—again, lending ostensibly for house purchase formed a major part of that—rose by 7 per cent. in the three months to March. That is a rise of £4·4 billion compared with 0·2 billion in the three months to February. The money borrowed as part of those figures for house purchase both feeds on and fuels the massive rises in property prices which have taken place, especially in London and the south-east, during the last couple of years.
There was one slightly brighter point about the figures issued yesterday by the Bank of England. There was a considerable increase in industrial borrowing, and we hope that that is a sign that industry is now tentatively beginning to improve its investment performance, but that fact must not be allowed to mask the dramatic increases in individual, personal, domestic borrowing that yesterday's figures revealed.
Many problems are inevitably coming in train from that increase in borrowing. For example, personal savings are at their lowest for 26 years. When I asked the Prime Minister about that, she came out with a remarkable doctrine. In a letter to me of 16 February 1988 she seemed to claim that because there was greater confidence in the economy people felt that they could save less and spend more. She might care to tell that to the most prosperous and best performing economy in the world, Japan, because a large part of its economic success has been built precisely on high levels of personal saving.

6 pm

Mr. Ian Gow: So that the House may judge whether the interpretation that the hon. Gentleman put on the letter that he received from the Prime Minister is correct, will he read the relevant passage to the House?

Mr. Smith: I shall be delighted to do so. The relevant paragraph—the third—in the Prime Minister's letter says:
One reason for the fall in the ratio during the 1980s has probably been the reversal of that unsatisfactory position.
The Prime Minister had earlier in her letter been conducting her usual diatribe against the 1970s. She went on:
Inflation has been brought down to levels last experienced in the 1960s and, with greater confidence in the future, consumers are now in a position to save a smaller share of their real incomes and enjoy higher spending and living standards".
As an economic doctrine about the role of savings within an economy, that is astounding and somewhat peculiar in its economic logic.
We have a picture of personal savings at an extremely low level.

Mr. Oppenheim: Will the hon. Gentleman give way?

Mr. Smith: I should like to get on with my point. I shall give way to the hon. Gentleman in due course if he lets me continue for the moment.
The reality is rather different from that painted by the Prime Minister. For example, the Office of Fair Trading has estimated that more than 3 million adults have experienced difficulty in keeping up with their debt repayments during the past five years. That is the reality of the credit society that we in Britain have been building during the past seven or eight years.
The hon. Member for Beaconsfield (Mr. Smith) talked about people raising finance for house purchase. He will also be aware that repossessions of homes for mortgage arrears have risen fivefold in the past eight years. He will also doubtless be aware that the National Association of Citizens Advice Bureaux has recorded a doubling during that period of counselling on consumer debt and related items. Last year the citizens advice bureaux dealt with 1·4 million cases of debt counselling.
Personal indebtedness is a major and growing problem for many families and the more that credit is pushed upon them, sold to them in the glossiest and, in some cases, most misleading of ways, and the more that families are given insufficient information on which to make judgments, the more they will face problems of eventual indebtedness.
The growth of credit is bad enough for individuals; it is disastrous for the economy as a whole. The prosperity that parts of Britain—I emphasise parts—have been experiencing in the past couple of years has been built on a bubble of ever-expanding credit. It cannot go on for ever.
Yet the Chancellor's only response to the problem of credit expansion has been an idle and negligent one. His only answer is to adjust interest rates. Indeed, he reiterated that last Thursday in a speech to the Cities of London and Westminster Conservative Association's annual lunch. Where else should it have been held but at the Savoy hotel.
The Chancellor spoke about the problems of borrowing and credit. He made the somewhat surprising claim that fiscal policy was more or less unrelated to the availability of credit and levels of inflationary consumption. He seemed to be unaware of the fact that those people lucky enough to have benefited from the dramatic reductions in top rate tax in his Budget were unlikely to go out and spend the money that the Budget was giving them. He also ruled out any control of credit by the Government as being
a distortion of the market

Mr. Oppenheim: The hon. Gentleman makes a case that the savings ratio in Britain has fallen somewhat in recent years, but is it not true that the ratio of public debt has also fallen somewhat, and that contrasts rather dramatically with the situation in the 1970s when we had high public debt and relatively low private debt? May I further take him up on his comparison with Japan? He says that Japan has consistently had a high savings ratio and that is supposedly one of the main reasons for its success. But the fact is that in the 1960s and 1970s Britain's savings ratio was as high as Japan's, and that did not do us much good. One reason why it did not do us much good is that, whereas the Japanese had a low level of public debt and public spending, we had a high level of public debt and public spending. May I also ask whether, as a matter of interest, it is possible nowadays to join the Labour party on a credit card?

Mr. Smith: I shall deal with the hon. Gentleman's substantive points, which I think related to the balance in the overall economy between public and private debt. The hon. Gentleman ignores the need in any economy to have a healthy supply of credit within the private sector. I shall come to that in a minute, because the crucial factor there is the word "healthy".
But that is also a principle which should be applied to the public sector. To make a virtue, as the Chancellor seems to have been doing in the course of his various pronouncements in the past few months, of having a minus figure for his public sector borrowing requirement is not

necessarily a sensible way of planning for future investment in Britain's health, welfare and future wealth-creating capacity. That is an issue to which we shall doubtless return on many occasions in the next few months and years.
The Chief Secretary to the Treasury appears puzzled. I was making the basic point that for the Chancellor to claim that there is some necessary virtue in having a public sector borrowing surplus rather than a public sector borrowing deficit is not necessarily a sensible economic approach to running the national economy.

The Chief Secretary to the Treasury (Mr. John Major): Is the hon. Gentleman therefore suggesting precisely the converse, that it is more virtuous for the Government to have a borrowing requirement than to be in surplus? Is that the Labour party's policy now?

Mr. Smith: No, it depends inevitably on the supply of revenue to the Government and on what the Government wish to spend their money on. In current circumstances, when the Government have more money than they know sensibly what to do with, and, instead of doing what they should have done and investing properly in our Health Service, house building, education and local services, they have given money to top rate taxpayers, they have the balance wrong within their own overall budgetary levels.
Inevitably, from time to time, a Government will need to borrow. There will be times when a Government want to be in surplus. It all depends on the circumstances at the time. However, I suspect that making a virtue of the great motif of Government economic policy that the PSBR must always be in surplus, which seems to be the Chancellor of the Exchequer's current view, will haunt the Chancellor when economic circumstances change. The Chief Secretary to the Treasury ignored the fact that economic circumstances will change and are changing. One of the problems that will fuel the change is precisely the level of available credit and borrowing.

Mr. Major: I fear that the hon. Gentleman is misleading the House unintentionally. He equated the desirability, as he saw it, of the PSBR to necessary investment, also as he saw it, in public sector services. He thereby implied, and the Labour party states this frequently, that there is under-investment in those services. Perhaps he will remind the House of the level of public sector capital investment in the current year and the extent by which expenditure on priority programmes has increased in the past public expenditure round.

Mr. Smith: Yes. I can also remind the Chief Secretary of the needs that are not being met and which should be met by the Government in their current public expenditure provision.
I remind the Government of the desperate needs of the Health Service and the issues raised earlier by my hon. Friend the Member for Stoke-on-Trent, North (Ms. Walley), who referred to the way in which the Government have failed to fund fully the nurses' pay award. The Government are neglecting much in public financial provision. Instead of thinking that they have done everything that they need to do, they should consider the needs that are not being met, and which they should be meeting.
Referring once more to the nub of the proposition under discussion—personal sector borrowing and the way


in which personal credit is expanding— the Government's only answer is to say that we must adjust interest rates. At the same time, they rule out the possibility of alternatives such as any direct control of credit. They claim that high basic interest rates will solve the problem. They will not. High basic interest rates have very little impact on consumer credit consumption because the margins between base rate and consumer rates are so high.
High basic interest rates will have a direct impact on the mortgage rate. Any further rise in the mortgage rate—which must be imminent now—will have only temporary macroeconomic benefits while harming directly many millions of home owners. Higher interest rates do not appear to take much of the steam out of the credit boom, but they increase the risk of default.
In addition, high basic interest rates make life much more difficult for British business. The Confederation of British Industry estimates that the most recent five changes in interest rates have cost British industry about £625 million.

Mr. Jeremy Hanley: I have been following the hon. Gentleman's arguments with some care. Before he refers in detail to business interest charges, will he explain in the light of his statement that personal borrowing, particularly on credit cards, is dangerous for the economy and the individual, how he would discourage people from using credit cards? Would the Labour party introduce a tax on credit cards?

Mr. Smith: "No" is the short answer to that. The hon. Gentleman quite clearly has not listened to me with care. The proposition that I have been advancing is not that personal borrowing per se is bad, but that personal borrowing either at usurious rates of interest or when rising out of control, is not necessarily in the best interests of consumers or the economy as a whole. The key point is to ensure that the growth of consumer credit is kept properly under control

Mr. Hanley: How?

Mr. Smith: I was coming to that. It is not being kept properly under control at the moment. At the moment supply imposes more credit on consumers than they want or need.
The National Consumer Council has provided the answer to the question raised by the hon. Member for Richmond and Barnes (Mr. Hanley). It wants better protection for consumers and it has stated that fact clearly in many papers and statements over the past year. However, none of those documents relates directly to the new clause, so I will not refer to them in detail.
The Director General of Fair Trading also wants better protection for consumers and in his annual report he makes precisely the point made in new clause 3. In his annual report, Sir Gordon Borrie states:
For credit to be used successfully"—
hon. Members should notice that Sir Gordon, like Opposition Members, wants credit to be used successfully because it has a major, important and beneficial role to play in an economy provided that it is used successfully—
there are two vital prerequisites—first both parties must know what they are letting themselves in for; and second

credit must be both given and taken responsibly. This means that, if there are to be improvements, both lenders and borrowers must be better informed and both must demonstrate the highest standards of moral responsibility.
Better information is precisely what new clause 3 is about. The Opposition entirely agree with Sir Gordon Borrie, and the new clause is a first step towards a better informed consumer market better able to judge, discern and choose between available credit. New clause 3 will also assist the ability to make demand the arbiter of credit rather than supply. At present, supply dictates and credit is effectively on the loose.
If Conservative Members are not prepared to listen to me, to Sir Gordon Borrie or to the National Consumer Council, they might listen to what The Times stated this morning. The Times comments on the latest figures on bank lending. While welcoming the improvement in the figures in industrial borrowing, it describes the present state of affairs graphically as
a candy floss society busy spending its way towards the next balance of payments crisis.
That is precisely what is happening, but the Chancellor of the Exchequer sits back and believes that an adjustment of a half per cent. here or there in the base rate is sufficient to make amends. It is not. The least that the Government can do is to accept the logic of our case, accept the dangers inherent in the present situation, and accept our new clause to provide consumers with at least basic information about the rates of credit that are available to them, to enable them to make informed choices rather than uninformed choices, as they are doing at the moment.

Mr. Gow: This debate takes place in the benign presence of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). He had to listen, as you had to listen, Mr. Speaker, to the speech of the hon. Member for Islington, South and Finsbury (Mr. Smith). You are a keen student, Mr. Speaker, as I am, of missives that were sent by the right hon. Member for Ashton-under-Lyne and by the right hon. Member for Leeds, East (Mr. Healey) to Dr. Johannes Witteveen. On the desk in the study at our house in the republic of Lambeth there is a copy of the famous letter dated 15 December 1976.
By one of the strange accidents of events, I happened to re-read that letter this morning. The right hon. Member for Leeds, East assisted in drafting the letter. The then Labour Government embarked upon precisely that policy of borrowing that is, once again, advocated by the hon. Member for Islington, South and Finsbury. The right hon. Member for Ashton-under-Lyne approved the Chancellor of the Exchequer's draft commitment to reduce public borrowing and the share of public expenditure as a proportion of gross domestic product.
On that famous day, just before Christmas 1976, there was the beginning of an understanding of the need to restrain borrowing. [Interruption.] I should not be rebuked by Opposition Members for talking about borrowing. The hon. Member for Islington, South and Finsbury spent little time talking about new clause 3, but he spent considerable time redefining the Labour party's borrowing policies. My right hon. Friend the Chief Secretary to the Treasury was perfectly justified in intervening twice during the hon. Gentleman's speech to try to educate him in the lessons that were learnt 12 years ago by the right hon. Member for Ashton-under-Lyne, who is sitting only two Benches behind the hon.


Gentleman. We have heard the hon. Gentleman disagree with all the lessons that were learnt so painfully by the Labour Government in 1976.

Mr. Chris Smith: Will the hon. Gentleman give way?

Mr. Gow: Of course I shall give way. The more the hon. Gentleman seeks to intervene, the more I shall certainly give way.

Mr. Smith: I am delighted to receive such a ready reception from the hon. Gentleman. When he forecast a public sector borrowing requirement of £4 billion in 1986 and said that that was just about the right sort of borrowing level for the economy that year, was the Chancellor of the Exchequer being sensible, wise or foolish?

Mr. Gow: When my right hon. Friend the Chancellor presented his Budget statement in 1986, he made a forecast about the then borrowing requirement. He said that, in the conditions of 1986, it was correct to adopt a borrowing requirement of about the figure that the hon. Gentleman gave. Then, in 1987, my right hon. Friend budgeted for a small public sector borrowing requirement, but, as it turned out, there was a surplus or negative borrowing requirement in the financial year ended 30 March 1988. In his Budget statement in March this year, my right hon. Friend told the House that he would not budget for a surplus this year, and that, quite rightly, it will be the future policy of Conservative Chancellors—he gave no time limit—that there should not henceforth be a deficit Budget. That policy is long overdue.
The right hon. Member for Ashton-under-Lyne will recall that the last time a Labour Government balanced the Budget, Lord Jenkins of Hillhead, one of the founders of what used to be known as the Social Democratic party, was Chancellor. In each year from 1974 to 1979, we had a massive borrowing requirement. The Chancellor's decision, which was announced in this year's Budget, that henceforth we should have a surplus is one of the important factors that will have downward pressure on the rate of inflation.
I deplore the speech of the hon. Member for Islington, South and Finsbury. He will be corrected by the right hon. Member for Ashton-under-Lyne. There was another extraordinary contrast and illogicality in the hon. Gentleman's speech. He rebuked my right hon. Friend the Chancellor for allowing an explosion of domestic borrowing, and then criticised the same Chancellor for curtailing public borrowing. That was an extraordinary duality of proposition in consecutive sentences. I shall refer to the serious explosion of domestic credit.
I am certainly one of those who believe that, on balance, my right hon. Friend the Chancellor was mistaken to reduce interest rates. I welcome the 2·5 per cent. increase in interest rates in the past six weeks. Now that the Chancellor has wisely decided that there is to be an excess of revenue over expenditure this year—I am sure that he will meet and possibly exceed that target—interest rates are the principal remaining weapon in his hands for keeping downward pressure on inflation.
Interest rates are referred to in the new clause. I am glad to see my right hon. Friend the Chief Secretary on the Treasury Bench. If, by the end of this Parliament, we are to abate the evil of inflation still further—I believe that we should—and secure the goal of stable prices, which, after

12 years of Tory Governments, we should secure—that means zero inflation—we must face up to the fact that we must have relatively high interest rates.

Mr. Nigel Griffiths: How does the hon. Gentleman square his opinion with that of Dr. Andrew Sentance, the head of the CBI's economic trends policy group? He stated:
Industry is currently bearing the brunt of the Government's determination to squeeze inflation by raising interest rates.
Does the hon. Gentleman realise that by "bearing the brunt" the head of the economic trends policy group means more job losses and less competitiveness abroad, and that that is a direct consequence of what the hon. Gentleman is advocating?

Mr. Gow: I do not know how you would react to comments from officials of the CBI, Mr. Speaker. I should be anxious if I found myself in agreement with the economic spokesman of the CBI. It comes as no surprise that the CBI is criticising the Government's interest rate policy. There would be greater reason to sympathise with Government critics in the CBI if, in recent years, when we have had high interest rates, industry had performed less well. The truth is that such folk are always whingeing. You do not have the misfortune to listen to them as often as some hon. Members do, Mr. Speaker.
As a result of the policies we have pursued over the past nine years, our determination to abate the evil of inflation has enabled industry to secure the dramatic renewal of its own fortunes, the dramatic increase in output, and improved productivity. It lies very ill on the lips of CBI members to criticise the very Government policies on interest rates that have brought about their companies' renewal.

Mr. Hanley: Does my hon. Friend agree that it is the failure of CBI members to keep wage increases under control that is one of the greatest contributory factors to the inflation we have today?

Mr. Gow: I have never believed that high wages cause inflation, but I have believed that high wages cause unemployment. Only Governments can cause inflation, and only Governments can cure it.
By another of those strange accidents of events, I have in my hand a copy of a speech made by the noble Lord, Lord Callaghan when he was Prime Minister. The post that he held was First Lord of the Treasury. [Laughter.]My hon. Friend the Member for Watford (Mr. Garel-Jones) laughs when I remind him that Lord Callaghan was First Lord of the Treasury, but the right hon. Member for Ashton-under-Lyne remembers it, because he was at the Treaury at the time.

Mr. David Winnick: That is more than the hon. Member for Eastbourne (Mr. Gow) ever was.

Mr. Gow: I was at the Treasury, although not for very long. However, when Opposition Members intervene from a sedentary position, their interventions should at least conform with the truth. I have always had a suspicion about those who wear red shirts, and my suspicion seems to be confirmed.
I commend this quotation to the hon. Member for Islington, South and Finsbury, who is now the Opposition


spokesman on Treasury matters. I have a copy of this excellent speech also at the side of my bed, along with the famous letter of 15 December 1976.

Mr. Tristan Garel-Jones (Vice-Chamberlain of Her Majesty's Household): To whom was that letter written?

Mr. Gow: My hon. Friend was not in the Chamber when I mentioned earlier that the letter was to Dr. Johannes Witteveen. I shall send a copy to the Vice-Chamberlain.
This speech was made a little earlier, in September. In it, the then Prime Minister commented:
We used to think that you could spend your way out of a recession, and increase employment by…boosting Government spending. I tell you in all candour that that option no longer exists, and that in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.
Yet we hear the Opposition spokesman on Treasury matters say that the Government are wrong to eliminate borrowing this year, and that they are wrong to set out as a long-term strategy a commitment to no further borrowing but to the repayment of debt. The hon. Gentleman ought to be pleased that the Government have decided to lighten the burden on our children, upon whom an extra burden had been heaped by the Labour party, because every time that a Government borrows to finance current expenditure, it is the next generation that must repay that borrowing.
Labour party Members claim to be the great moralists. They accuse my right hon. and hon. Friends who sit on the Treasury Bench of being immoral, but the great immorality is for Governments to borrow. The great morality is this Government's commitment to repay debt.

Mr. Robert Sheldon: The hon. Member for Eastbourne (Mr. Gow) has a fair selection of bedroom ornaments, and I offer another that he may like to add. I refer to another speech of the now noble Lord, Lord Callaghan. When he was Chancellor of the Exchequer he claimed to have a triple objective, which was to keep inflation down, to keep the balance of payments right, and to improve growth. He omitted reducing unemployment, because that was not a problem at the time. It is a measure of change that one can no longer talk about a triple objective, because reducing unemployment is now also a major objective.
My noble Friend did not achieve his triple objective but it was an honourable one at which to aim. Today, we have a simple objective. It is not difficult to attain, based as it is purely on the level of inflation; all other matters are subordinate to the task of reducing inflation. I am not denying the importance of that objective, but I deny the overwhelming significance we attach to it in a limited manner of operation.
Our balance of payments is now right, not because of any brilliance on behalf of the Government but because of North sea oil. It is not a question of revenue but of the balance of payments. We used to import enormous quantities of oil, which cost us large numbers of dollars. Now we export our oil. That is the major difference, and we ought to be more aware of that than of the more secondary revenue implications.
Growth comes in the wake of balance of payments, because that was the major constraint throughout our entire post-war history. Ever since 1945, stop-go was a question of our balance of payments. It is no measure of the brilliance of the Government's operation of the economy that that constraint is not what it was.
The Government's determination to keep down inflation is admirable, but they have gone a little too far in a number of directions. They have tried to interfere with the exchange rates. The level of the pound, the deutschmark and the dollar, has become of overwhelming importance. All of my hon. Friends, and I suspect many Conservative Members, agree with the Chancellor of the Exchequer in his quarrel with the Prime Minister, believing that he was right and that she was wrong. He was right to take into account the situation that will emerge at the end of this year, when our balance of payments moves into deficit. The Chancellor attempted, quite rightly, to iron out that peak in the deutschmark in particular, even to the extent of not enjoying the beneficial effects upon inflation that the Prime Minister put as the dominant factor.
The right hon. Lady took the easy way out. The easy way out has been chosen by too many Chancellors of the Exchequer facing a level of inflation that was greater than they wanted. They tried to make the pound too strong, and it was industry that suffered. Industry suffers again and again. The Government receives the cheers of the City but the complaints of industry.
The hon. Member for Eastbourne should not diminish too much the views of the CBI. Occasionally, it does talk a little bit of nonsense, but in so far as there is any organisation speaking for industry, it does not do so all the time. It speaks also for other aspects of the economy. In speaking for industry, nobody does it better than the CBI. Chambers of commerce perform that function fairly well, but the CBI is a much more important body. We should not try to diminish its efforts to stand up for manufacturing industry in a way that no other body does.

Mr. Oppenheim: How can the right hon. Gentleman assert that the Government are keeping the pound too strong when the current pound-deutschmark exchange rate is 20 per cent. lower than it was two years ago? It is also about 40 per cent. lower than it was five years ago. Even against the dollar, the pound is about 20 per cent. lower than it was five or six years ago.

Mr. Sheldon: The hon. Member for Amber Valley (Mr. Oppenheim) should not view such matters historically. It is simply a matter of looking at our balance of trade. That is the real test of how well we are exporting the products of our manufacturing industries, and that figure has declined markedly by comparision with imports of manufactured articles. That is the test of industry, and it is the test of employment as well. So we see that there is a need to reduce interest levels, which was a point put so well by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith).
It is the easiest thing in the world to increase interest rates in an attempt to affect inflation, but I do not think that that will have much effect on consumer demand when consumers are paying the rates that my hon. Friend has described. When they are paying between 25 and 35 per cent. APR, the odd 1 per cent. will not make much difference to them. It will, however, have an enormous effect on industry. That is the dilemma: the one can be


helped, but only at the expense of the other. In the one case such action will have little effect, and in the other it will cause disproportionate suffering. Once again industry is the major victim of the Government's policies.
The inflation problem does not relate merely to the retail prices index, at somewhere between 4 and 5 per cent. Property inflation must also be taken into account. Statistics do not tell us much about that aspect, but it is enormously important. We have given advantage after advantage to those who, instead of spending their money on productive assets, spend it on the way in which they live in their houses. We have gone too far: the level of mortgage relief is now quite nonsensical.
The tax return on productive assets does not bear comparison with the advantage from adding an extension to a house, trading up and moving into a new one. Buying a productive asset means paying capital gains tax of up to 40 per cent., but nothing need be paid on a home. In the case of inheritance tax, those who trade up will again have the advantage. The abolition of schedule A was nonsense. Buying a productive asset means paying the full tax on the income from it, but no tax need be paid on the advantage of paying no rent on a property.
That absurdity of absurdities, the poll tax, will act as a further ratchet on the value of expensive houses. No one could oppose home ownership, but we can oppose the incredible distortion that results form it. House price inflation is 3 or 4 times the RPI, or even higher. Those who want inflation to fall must level that charge at the Government.
House prices vary too much between the north and the south. House prices in the north, particularly in the past month or two, have increased very rapidly, and I do not regard that as a good development. We are not simply equalising prices in the north and the south; we are letting the disease travel north. Inflation of 4·5 or 4·75 per cent. may be important, but it is not having the devastating effects of the 15, 20 or 25 per cent. inflation in house prices.

The Economic Secretary to the Treasury (Mr. Peter Lilley): The right hon. Gentleman said that he thought that the difference between house prices in the south and those in the north was too great, but that he did not want it to be made good by a rise in house prices in the north. Does he advocate engineering a fall in prices in the south?

Mr. Sheldon: That is a very facile question for the Ecomomic Secretary to put. Of course I do not. The result of the increase in house prices is that people are behaving as if they had received large increases in their wealth—which indeed they have—and gaining some comfort from those increases by sitting on them. That causes a distortion of the housing market in this part of the country. I am sure that, in his more reflective moments, the Economic Secretary will not try to defend the increase in house prices. No one would defend it. People say that it is a pity, but that they see no way of doing much about it.
6.45 pm
I am not sure that I have the agreement of my Front Bench—one of the pleasures of being a Back Bencher is being able to speak one's mind without considering the consequences too fully—but I believe that we should think about credit control. Of course there is no final answer; instructions to the banks and credit card controls are not

permanent. But nothing in this sphere is permanent. It is the Government's ideology that prevents them from even considering the possible solutions.
Financial management is about a number of solutions. That, indeed, is what Budgets are about. They do not aim to set the economy for all time, but seek to deal with problems as they arise. A major problem of our time is the level of house prices and the level of credit, which have gone disgracefully wrong, and the way in which credit for consumers is going ahead much more strongly than credit for industry.

Sir William Clark: Apart frorn advocating the imposition of credit controls—which did not work very well when his party was in government—is the right hon. Gentleman now saying that Labour policy is to abolish mortgage interest relief on owner-occupation, and at the same time to introduce capital gains tax on any profit that an owner-occupier might obtain on selling his house?

Mr. Sheldon: The hon. Gentleman usually listens to me rather more carefully. I distanced myself from the Front Bench from the outset. I have just pointed out that the advantage of speaking from the Back Benches is that one speaks for oneself. Speaking for myself, I should like to see some sort of credit control.
The hon. Gentleman has said that credit controls did not work in the past. I know that they cannot work over a long period, but what they can do is have an immediate and direct impact at the time of their imposition. The impact will weaken and die away thereafter, but such immediate intervention might bring about an improvement in the present position.

Mr. Nicholas Bennett: The right hon. Gentleman has talked about house prices. Is it not more symptomatic that demand may be outstripping supply? Ought we not to ease planning controls to allow developers to build more houses?
The right hon. Gentleman and his hon. Friends should support the Housing Bill, which will bring on to the housing market many of the 700,000 surplus properties that are being kept empty because of the Rent Acts.

Mr. Sheldon: As for surplus properties, the Public Accounts Committee found that the Ministry of Defence was far worse about hoarding its houses than any local authority, but we had better not go any further into that.
Of course this is a matter of supply and demand—because it is so easy to obtain credit. That is the entire point of what I have been saying. There is of course no final solution, and anyone who thinks that we can legislate and then go away for a year or two is living in cloud-cuckoo-land. But what we can do is produce a temporary effect.
It is a pity that Conservative Members' ideology does not allow them to examine such methods. We could have a better debate if these matters were examined more fully.

Mr. Oppenheim: Judging from the comments made by both Front and Back-Bench Opposition Members, it appears that credit explosions are all right as long as they are in the public sector, but that they are immoral in the private sector. That is a strange contradiction, but goes some way to explaining why earlier this decade, in 1983–8.4, Opposition Front Bench spokesmen said that we should emulate the public spending policies of the Government of


the United States of America, a line which they rapidly dropped when the pigeons came home to roost in America a couple of years ago, when the Americans began to see what we unfortunately found out in the 1970s and what Lord Callaghan found out a little earlier—that one cannot simply spend one's way to economic success or out of recession. Far from it, because that just means inflation and builds a store of problems for the future.
The hon. Member for Islington, South and Finsbury (Mr. Smith) spoke knowledgeably about Japan. I am sure that he has a lot of first-hand experience of Japan. He mentioned that the Japanese have a high savings ratio. It is also true that, along with their high savings ratio in the private sector, the Japanese have consistently had a low level of public debt and a relatively low level of public spending. The Japanese have had to save a lot of money for their old age because their public and state provision is not very good.

Mr. Chris Smith: Perhaps the hon. Gentleman will reflect on the fact that the Japanese are so successful in keeping public spending down because they spend less than 1 per cent. of their GDP on defence.

Mr. Oppenheim: The hon. Gentleman is quite right. The Japanese do spend a small amount on defence because that was the agreement that they made with the American occupying forces in 1952. It might interest the hon. Gentleman to know that the Japanese are moving rapidly to becoming the world's third largest spender on defence because their GNP is far higher than ours. Even forgetting defence spending, and whichever way one looks at it—the fairest way is as a proportion of GNP—Japanese public spending is far lower than ours and has been far lower ever since the war. Indeed, it is far lower than that of almost any other developed country.
By contrast, Britain also had a high private savings ratio in the 1960s and 1970s. In fact, our savings ratio was almost as high as that of Japan. Therefore, it is not wise to try to argue that a high private savings ratio is necessarily the main road to economic success. A savings ratio is part of the story but what we did in the 1960s and 1970s, which was to have high private savings but also high public borrowing and spending, is the way to disaster and is certainly not one of the main planks of Japan's economic success.

Mr. Rhodri Morgan: Will the hon. Gentleman comment on today's statement by Mr. John Banham, the director general of the Confederation of British Industry, that Britain should now save more and spend less and that the tax cuts in the Budget, especially those given to higher rate taxpayers, were a great mistake in our economic policy because they will lead to much higher consumption and a further lowering of the private savings ratio?

Mr. Oppenheim: I am happy to comment on that. I am afraid that the hon. Gentleman does not realise the nature of the CBI. It is a pressure group, and one main function of pressure groups is to whinge and whine. Throughout this Government's period in office, the CBI has issued statements weekly and monthly which have often opposed the Government's economic policy. Indeed, in inverse proportion to the number of statements that it has issued

attacking Government policy, the economy has grown more and more successfully—[HON. MEMBERS: "Is the statement true?"] Mr. Banham may well have made that comment, but I would dispute its veracity or relevance.
It is ludicrous to say that a high private savings ratio is the main plank of any country's economic success. It certainly is not. If the hon. Member for Islington, South and Finsbury wants to to take Japan as an example, I must advise him that Japan's economic success relies on far more complex causes than just its high savings ratio.
Another point which has been missed is that three quarters of the private debt at the moment is debt which is fully secured against housing; it is not debt which is being used primarily to buy imported consumer products. In many ways it is a good thing, as it means that we have an expansion of home ownership. However, I go a little way towards meeting the arguments of the hon. Member for Islington, South and Finsbury in that it is at least arguable that too large a proportion of our national wealth is in housing. In some of the more successful economies, a lower proportion of wealth goes into housing. The hon. Gentleman might have had a point if he had cared to make it a little more forcefully.
I should like to turn to the substance of the new clause—

Mr. Gow: There is no substance.

Mr. Oppenheim: Well, my hon. Friend says that there is no substance and that is not a comment on which I would choose to take him to task.
My understanding of the lack of substance of the new clause is that the hon. Member for Islington, South and Finsbury would like to introduce a league table of interest rates which would be published monthly. That is a bureaucratic nonsense. My first question is, where will that league table be published? My second question is, how would the hon. Gentleman ensure that all interest rates are published in that league table? Unless he can assure me that every interest rate would be published, I believe that the whole point of the league table would be lost.
The hon. Gentleman mentioned that there were backstreet pedlars of debt with interest rates of up to 4,000 per cent. How can he be absolutely sure that all those backstreet pedlars of debt would be included in the league table? Unless he can assure me that the league table would be completely comprehensive, I believe that it will be a total waste of time.
I noticed with some concern—

Ms. Hilary Armstrong: Why is it important that every interest rate is included in the league, rather than a sample which would give consumers a greater knowledge of or greater desire to find out about the particular rate that they were being asked to pay?

Mr. Oppenheim: Surely, if people want a relatively small sample or a selection of the current interest rates, they can find that in most newspapers, as they currently publish samples weekly. Even the beloved Daily Mirror publishes a sample of interest rates on its weekly money page which it introduced about two years ago. Therefore, a certain amount of selective information is already available to the public.
If the state is to provide a huge league table of national interest rates, it must be comprehensive; otherwise it will not add anything to the information that is already


available to the public. Where would the league table be published so that it is accessible to the public, and how will the hon. Member for Islington, South and Finsbury ensure that at least a substantial number of interest rates are available in the list?
I think that I heard the hon. Gentleman trying to induce support for the new clause from the National Consumer Council. I think that I can speak with a little authority when it comes to the views of the National Consumer Council and I can absolutely and categorically assure the hon. Gentleman that, far from supporting the new clause, the National Consumer Council thinks it a total nonsense.
Finally, if the hon. Member for Islington, South and Finsbury had limited his aims to something a little more sensible and attainable, he might have achieved something, but as usual the Opposition have tended to go way over the top in trying to propose something totally unattainable.

Mr. Tony Worthington: Will the hon. Gentleman inform us at what meeting the National Consumer Council considered the new clause and pronounced it a total nonsense?

Mr. Oppenheim: I thank the hon. Gentleman for his intervention and can advise him that the chairman of the National Consumer Council personally informed me that she thought the new clause a total waste of time. I hope that that is sufficient authority for the hon. Gentleman.

Mr. Elliot Morley: rose—

Mr. Oppenheim: I should like to continue because I am coming to the end of my brief speech—[Interruption.] The hon. Member for Clydebank and Milngayie (Mr. Worthington) should pipe down and listen.
If the Opposition spokesman had concentrated on something that was attainable—

Mr.Morley: rose—

Mr. Oppenheim: No, I shall not give way.
If the hon. Member for Islington, South and Finsbury had concentrated on something attainable, he might have gained some sympathy from Conservative Members. He could have concentrated on the fact that when credit card holders get their monthly bill, the only interest rate which legally has to be quoted is the monthly interest rate. No APR, no annualised interest rate and no annual interest rate is quoted on monthly credit card statements. I believe that that is misleading because it gives credit card borrowers a false sense of security. If they see that they are paying 2·5 per cent., 3 per cent. or even 4 per cent. monthly, they do not consider it to be very much. If they saw the true annualised rate, the true APR at anything between 20 per cent. to 50 per cent. plus, they would be far more concerned and far less likely to borrow.
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If the hon. Member for Islington, South and Finsbury had limited himself to the sensible objective of trying to persuade the Government to ensure that APRs and annualised interest rates were printed on credit card statements, he would have gained more sympathy from Conservative Members, and possibly achieved some success. I shall make up for the hon. Gentleman's deficiency by proposing to my hon. Friend the Minister that he should consider making it legally incumbent on

credit card companies to publish on monthly credit card statements the APR that people are expected to pay, instead of simply the monthly interest rate.

Mr. Worthington: We tabled new clause 3 because we believe that people should be helped to be more aware of the true cost of credit in this country. The figures that were quoted by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) demonstrate the enormous range of interest rates that are charged and that people should be made much more aware of those issues. The Opposition believe that the credit explosion and the increasing amount of debt because of that credit pose a considerable problem.
The Scottish Consumer Council, which decides its affairs in a much more democratic way than the National Consumer Council, where apparently mummy speaks and that is the view, believes that there is a problem with regard to the credit explosion. In March this year it published a study of debt and debt advice in Scotland. Of course, such studies are already out of date because their research extended only to 1986. However, it is worth noting that the Scottish Consumer Council received no co-operation in its investigation from the credit card companies in regard to the level of public accountability which it wanted to show. The Scottish Consumer Council demonstrated that in the past five years the consumer credit taken on by the public had increased by about 50 per cent., and that that increase in credit was much more rapid for bank credit cards, and particularly for in-store credit cards.
Of course, for many people it is not a problem, as my hon. Friend the Member for Islington, South and Finsbury said. Credit is essential in our society, and Barclaycard published the fact that something like 40 per cent. of people settle their debts within a month. For those people credit is a form of cheap, interest-free loan. However, 60 per cent. do not do so.
What are the dimensions of the debt problems that people face? Let us consider the issue in regard to housing in Scotland. In 1986, 36 per cent. of those in local authority housing in Scotland were in arrears and 27 per cent. of people in Scottish Special Housing Association dwellings were in rent arrears. In regard to mortgage arrears in the United Kingdom, between 1982 and 1986, the number of those more than 12 months in arrears went up from 6,000 to 11,000. Between 1979 and 1986 those who were between six months and 12 months in arrears on owner-occupied housing went up from 2,500 to more than 20,000—an eightfold increase in seven years. The Scottish Consumer Council calculated that around 20 per cent. of all Scottish households—that is, about 400,000 households—were substantially in debt in terms of housing.
As for Gas Board disconnections, between 1983 and 1987 there was something like a 90 per cent. rise in disconnections, and in 1985–86 around 600,000 British Gas consumers were on repayment plans which were their way of settling their debts. The Association of Scottish Citizens Advice Bureaux reports that, between 1983–84 and 1986–87, the number of inquiries it received relating to clients' debt problems went up from 13,000 to more than 42,000—an increase of more than 300 per cent.
The Scottish Association of Citizens Advice Bureaux considers that the problem of debt is increasing massively. It does not consider that the problem has been caused by the fecklessness and unworthiness of people in debt. It believes that it has a number of causes. Certainly in


Strathclyde it is due to the increasing poverty experienced in that area, where about a third of the people are at or around supplementary benefit level. Those figures covered 1986–87 and can only have worsened since the housing benefit changes, the 20 per cent. contribution to rates and the increasing problems of fuel debt.
It is worth pointing out that there are considerable public costs to private credit. Those public costs relate to the work that has to be done by the courts and by social services and housing departments. In Strathclyde, about 70 per cent. of the clients of the social services department are there because of debt-related problems. Even the taking of children into care is related to poverty and debt. Large profits are being made at considerable public cost.
The in-store credit cards are particularly blameworthy. In some cases, there seems to be virtually no check on creditworthiness. Sir Gordon Borrie, of the Office of Fair Trading said:
A few are giving them away like sweeties.
That is not the usual language in official reports.
I hope that new clause 3 is part of the way in which we can give people a greater awareness of the cost of credit, and that through such lists and other mechanisms people will eventually come to recognise that the way in which we borrow money in this country is simply crazy. It makes very large profits for remote finance houses. Surely we must look for other ways of providing cheaper credit.
It is particularly annoying that, as in all things, the poor pay more. They certainly pay more for credit. I should like to spend a little time encouraging people from all political parties throughout the United Kingdom to look more closely at the contribution that credit unions could make to providing better and cheaper credit. Credit unions manage to advance money at a fraction of the cost to the citizen with a very low rate of credit default—far lower than that achieved by finance houses. It is important to see that the credit union is there to serve the needs of its members rather than to exploit their need for credit. We need networks of credit unions to replace our reliance on finance houses and credit cards, charging the APR that was quoted earlier.
Strangely, credit unions have not thrived in Britain, as they have elsewhere. For example, the first credit union in the United States was formed in 1909 and by 1970 there were 23,400 credit unions in the United States. Some of them are now massive. In 1984 there were 82,000 credit unions in 55 countries with combined debt assets of £402 billion. In Britain in 1984 there were only 72 credit unions, which were mainly small, but they are growing in number. The number has increased considerably in recent years and there are now 73 hon. Members with credit unions in their constituencies.
I am pleased to be talking about this because the region from which I come, Strathclyde, has the greatest concentration of credit unions in the country and the district I represent, Clydebank, has the highest concentration of credit unions within Strathclyde. I know from experience what an enormous contribution they have made to people in my constituency on average and below average incomes in terms of reducing the amount of money that has to be paid to finance houses.
The House—including the Labour movement—has not paid enough attention to cost minimalisation. We have been concerned about the impact of poverty but we have

not looked adequately at ways in which to reduce the cost of credit. Credit unions are one way in which we could do that.
My motive for supporting the clause, which is about the publication of lists, is to bring home to people the horrendous cost of credit in this country because of the way in which the financial system operates. By joining credit unions people could obtain that credit at a much lower cost. It is gratifying that organisations such as police forces are increasingly forming their own credit unions and giving credibility to the movement. I hope that people will take note of the desirability of bringing home to people the cost of credit and that they will realise that this is only a step to finding a better way of allowing people on average and below average incomes to borrow more cheaply.

Mr. Anthony Beaumont-Dark: I have always been interested in the interest rate structure and it is right that any changes should be published. The problem faced by Governments is that they place too much simple faith upon the movement of interest rates. A £5,000 overdraft is a lot of money. However, if people are locked into that overdraft, a 2 per cent. change in interest rates means only an extra £100 a year. However, if industry is locked into the interest rate structure and is involved with sums of £1 million, £2 million, £3 million or £4 million, it has a huge effect upon how it structures its costs.
Governments have too simplistic a faith in the fact that interest rates can control the spending pattern of a country. I do not think they can. It is almost like going back all those years to Adam Smith's day, when, if people were short of money, they ended up being able to afford to buy only bread even though bread cost a huge sum because they could not afford anything else. If people are locked into overdrafts and owing money, in the end all they can afford to do is to pay interest on that money. Governments should not make interest so expensive but should go back to the days when one did something about controlling the way in which money was spent.
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In an age such as this, why do people think that they should be able to borrow money cheaply in order to buy a house when house prices are rocketing? Why do people think that they should be able to obtain money to buy a house at a cost lower than they can obtain money to set up a business? It is much more important for people to be able to borrow money and obtain tax concessions in order to set up a business than just to invest in a home when its value goes up. I am a great believer in people owning their own homes. As a man who has been involved in investment all my life, I can say that one of the best investments I ever made has been in my home. Why is it that, because of some ideology we need to give tax concessions on home ownership?
It is splendid to own one's own home, but is it not better to encourage people to invest in growth or in a business? Thanks to one of the most enlightened and progressive Chancellors of recent years—one needs luck as well, and if I had to choose between being lucky or clever, I would always choose being lucky—we are set upon a path of growth, and so-called experts tell us that within the next five or 10 years we will be able to do away with income tax


altogether or reduce the national debt. Surely, if we give concessions on interest rates, they should be to people who encourage growth of real resources.
One of the problems about owning homes and putting money into property is that it is basically sterile capital. People ask whether the price of the pound will be affected by controlling interest rates. I do not think that it will. We have to ensure that we encourage the growth of capital in Britain.
We cannot spend money until it has been earned. Some Governments have tried to do that. Some of our friends on the Opposition Front Bench were involved in Governments who thought that they could spend money they had not earned. We cannot do that because it encourages inflation. We should encourage growth. We should encourage people to invest not in property but in a growing business. We need to give people interest rate concessions on putting money into businesses, whether a small shop, a small business or a great business.
We have had to put up interest rates five times—2·5 per cent.—in the past few weeks, but to what avail? It has not stopped people borrowing money in the shops or borrowing money to buy houses. It will discourage people from setting up businesses. I urge the Government —

Mr. Morgan: There is a great deal of thoughtfulness in what the hon. Gentleman is saying, but is he not missing out one factor that tends to make the investment in our home usually the only or best investment that we make? That factor is that it is almost guaranteed to go up in value. In other countries, particularly in the United States, if an area does badly in economic terms, the value of houses will fall by 20 or 30 per cent. In Seattle, for example, that happened during the aviation crisis in the early 1970s; and in Houston, Texas the price of houses dropped by 25 per cent. a couple of years ago. Is he saying that in such circumstances people can make a more rational decision between investment in business and investment in housing?

Mr. Beaumont-Dark: No. I am saying that the reason why property values are rising so much—and the trend is sweeping from London to the midlands and even to the north—is that the country is basically so prosperous. Tax concessions make buying a home one of the best things to do. In Switzerland and Germany more people rent than buy property, but in this country buying a home is a fantastic investment.
I give myself as an example. I live in the midlands and when I got married in 1959 I paid £3,100 for a house that would now change hands at £120,000. Why the hell do I need tax concessions as well? It is better to give tax concessions to people who are building up a business than to people who own their homes.
When we talk about interest rates, we tend to forget that we must encourage growth. Interest rates affect growth considerably. When a person starts to build up a business, he needs to borrow money and that is when concessions and help are needed. They are also needed when people buy their first home, and I am a great believer in giving tax concessions to those people. But why should we give concessions year after year to people who do not need them? It is best to give all tax concessions on interest rates to those who are buying their first home, starting their first business or starting their first venture into life.
The problem is that when one reaches a prosperous stage in life one can sometimes become greedy. Sir Robert

Crichton-Brown of British American Tobacco is not content with getting £290,000 a year and share options. He wants to be given £750,000 tax-free as well. The idea of business and enterprise is not merely that people should think that the world owes them something because they have been lucky enough to become a director of a good business and because 29,860 other people happen to work for that company. Becomin,g the chairman should not be regarded as hitting bingo or winning first prize in the premium bonds.
The idea of capitalism, as I understand it, is that we do not simply say to people that it is easy for everybody. Of course we must encourage people to go in for enterprise, but we must not allow one or two people to foul the nest from which the golden eggs must come. The golden eggs must be laid. What happens at the moment is that people like Sir Robert Crichton-Brown of BAT or Sir John Clark at Plessey think that it is their world. It is not. It is everybody's world. Capitalism will grow if people understand that. I hope that the shareholders of BAT will vote against the extremists—whether on the union side or on the capitalist side. The whole idea of capitalism and prosperity is that things should be done from a moral point of view. It is not moral when people simply help themselves; and if capitalism is not moral, it is nothing.

Mr. Doug Henderson: I am rather surprised by the direction that the debate is taking. We have heard some interesting views on interest rates and their effect on the economy, and I hope that we shall hear more on that subject tomorrow, on Third Reading.
New clause 3 embodies a simple proposition, which I think is unanswerable. I am surprised that Conservative Members have resisted the proposal that the Government should publish regularly the real rates of interest pertaining in different sections of our economic life. It is especially surprising that the Government should take that view in an age in which we commonly have to identify the the contents of goods that we trade in, in which advertising codes are required for the pensions provisions of the Financial Services Act and in which there is general demand by the public for more ready access to information.
I find the attitude of Conservative Back Benchers somewhat disingenuous. I do not wish to single out the hon. Member for Amber Valley (Mr. Oppenheim) for special mention, but he looked rather shamefaced when he suggested that it was impractical for the Government to publish a list of relevant interest rates. He is a member of a party that would have us believe that consumer choice is everything. I should have thought that the Conservative party would want to give the consumer the maximum information on which to make a choice.
The new clause is not about restricting or even regulating credit card operations, although if my mailbag is in any way typical, there is growing public demand for more strict controls on credit cards. The representations come not just from the Churches but from many business organisations and, most desperately, from people whose lives have been wrecked when the pack of credit cards has fallen.
Borrowing is not unique to a particular class. I know that it is not fashionable to talk about class these days but in the city of Newcastle, people in Gosforth can distinguish between their standard of living and that of people on the


Newbiggin Hall estate. All sections of the community are equally likely to borrow. The difference is that when the richest in our community borrow, they are considered to be upstanding: for them, borrowing is laudable, even quite prudent. Anyone on his way up in society has to borrow to get there. It is considered to be a sign of dynamism. In the rich sections of society, it is not even called borrowing. It is called investment.
That is a far cry from what happens to people from the Newbiggin Hall estate in my constituency, who have to borrow. When they go to the DHSS office to ask for money from the social fund to help their family, it is considered slightly shady. That borrowing is regarded as a sign of bad household management, even though it enables families to make ends meet and makes the difference between having some kind of existence and not having an existence at all.
The rich have the advantage of full information. My Gosforth constituents have access to their bank manager, their building society manager, perhaps to a stockbroker on a trip to London on a first-class saver, to the counter staff at Harrods and perhaps, at their golf club, to money managers, who exist even in the city of Newcastle. They know the real cost of borrowing, whether on their Access card, their Visa card or on a credit card for a retail store. They know what they are paying.
The super-rich who consult finance houses or credit brokers know exactly what they are doing. They know the difference between a bank overdraft and a bank loan or any other source of finance. They know the rate of interest and the cost, just as Antonio in "The Merchant of Venice" knew the real cost when he had to borrow from Shylock to help his pal Bassanio with funds for a wedding [Laughter.] I am glad that that amuses my literary Friend the Member for Cardiff, West (Mr. Morgan). Such people know the real cost and they rarely default on any of their borrowings to finance investments. They rarely have to pay a pound of flesh.
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I ask the Economic Secretary to contrast the information available to the rich—I am not saying that it should not be available—with the information which is available not only to those who are the poorest, such as my constituents at Newbiggin Hall, but to the average citizen who is perhaps a more typical borrower on credit these days. Most people borrow to make ends meet rather than to make a speculative investment, and many have to pay exorbitant interest rates.
Contrary to what the Economic Secretary and Conservative Members may think, my average constituent does not have the information. When he goes to his DHSS office, the person behind the counter is not the chap with whom he played golf the previous Saturday, who gave him advice on how to invest his Giro. When he goes to the local shop, the person who serves him is not someone with whom he has had a Pimms in the club, who has told him of the latest bet in the City on which he should borrow money. When he goes to the Newburn Memorial club on a Friday night for a game of snooker and a pint of scotch —[Interruption.]No half pints, as at the annual beano in Amber Valley—there are not many money brokers to advise him on how to invest his funds and what risks to

take. It is little wonder, with the lack of information on credit available to the average citizen, that people are increasingly becoming pawns to their credit cards.
I had better not risk incurring the wrath of Whips and others on this side of the House, so I shall conclude. I do not want always to follow the example of my hon. Friend the Member for Wrexham (Dr. Marek) who often encouraged me to speak at length during the Committee stage.
New clause 3 would guarantee that more information was available to consumers. Someone who tries to obtain credit is a consumer in the same way as someone who tries to purchase a commodity. Such information could lead to an increasing awareness of the true costs of borrowing and credit. It could give the less-informed sections of our community a better chance to understand the implications of their borrowing and the risks of investing funds.
Crucially, it could perhaps begin to act against the increasing headache suffered by many individuals and families from the destruction of family life when the pack of credit cards falls. Such people come to Members of Parliament and explain the damage and their anger. If they had known what lay before them, they would not have borrowed in the first place, hard up as they are. It is important that people have such information and consumer choice, and it would be disingenuous of the Government not to accept the new clause.

Mr. Morley: The hon. Member for Amber Valley (Mr.Oppenheim) said that the National Consumer Council was not in favour of new clause 3, but I have a quote from it which states:
We recommend the issuing of guidance on prevailing interest rates for different types of loans. These should be widely publicised, so as to provide information for consumers.
That is exactly what the new clause seeks to do.
We need new clause 3 because of the massive growth in credit. About 77 million credit cards are in circulation in the United Kingdom and credit card companies are among the worst offenders on interest rates. It would be a great advantage to consumers to be able to compare the different categories of interest rates, whether for credit cards, hire purchase or other forms of loan. Interest on credit cards has been consistently about 14 per cent. above the average bank rate. Regulations should be introduced to deal with that, but that goes beyond what we can talk about in this debate and I certainly shall not take up time on it now.
There is concern that many consumers are not getting the information that they need to make the best decision on getting value for money from a loan. Too many people are waiting to take consumers for a ride. Credit card companies certainly come into that category—not only bank credit cards but in-store credit cards. We are talking not so much about flexible friends as plastic pirates, considering the interest rates which are charged, particularly in stores.
The question of interest rates goes beyond the United Kingdom. In France, interest rates on credit cards range between 12 per cent. and 18 per cent., in Belgium they range between 18 per cent. and 23 per cent., and even in the home of free enterprise, the United States, credit companies can make a profit charging 14 per cent. interest rates. That is a long way from the level of interest rates charged in the United Kingdom.
The most vulnerable need information most. Those who pay the highest interest rates are often pensioners. A pensioner in my constituency had difficulty paying an electricity bill so took out a short-term loan, the interest rate on which was more than 1,000 per cent. APR. As the law stands that is perfectly legal, but it was certainly nowhere near the best available deal. Even the electricity board, which would have helped, could have offered better terms.
The Government have a responsibility to make this information available to consumers and to assist consumers. They are responsible for adding to the debt problem. They have replaced many one-off payments for those in need with loans. They have pushed up energy prices deliberately as part of a political programme, thus adding to people's burdens. They have pushed up council house rents deliberately as part of their programme. All that has added to the burden of debt on the weakest and most vulnerable people in society.
The new clause tries to tackle some of the consequences of the explosion of debt and easy credit. There is a great need for more regulation. There should be controls on the interest rates that are charged. Clearer information should be printed on credit agreement forms so that people know exactly what they are getting into. There should be easier explanations of what APR means. The NCC survey found that 50 per cent. of people do not understand APR. There should also be restrictions on the peddling of in-store credit cards, which look attractive for short-term weekly repayments but whose APR rates are excessive. The new clause goes some way to giving consumers some rights and protections and the Government should back it to the hilt.

Mr. Lilley: We owe you, Mr. Deputy Speaker, and Mr. Speaker a debt of gratitude for allowing us a lose rein in this debate, as a result of which we have been treated to some fascinating contributions.
We heard a vintage performance from my hon. Friend the Member for Eastbourne (Mr. Gow), who endeavoured to entice us up to his bedroom with a promise that we could see, not his etchings, but certain framed letters from the IMF. There was a serious point behind what he said, and I am sure that all hon. Members took note of it. There has been an enormous change in the nature of the supposed problem that we are discussing today. The last Government were running a deficit of the equivalent of £40 billion a year; this Government are now running a surplus, and all that Opposition Members can do is to try to arouse our concern about borrowing in the private sector.
We also heard a speech that will merit re-reading from my hon. Friend the Member for Amber Valley (Mr. Oppenheim). It was interesting not only for the inside information that we were able to garner on the thinking of the chairman of the National Consumer Council but for his interesting proposal to print APRs on credit cards. I shall draw that suggestion to the attention of my right hon. and noble Friend the Secretary of State for Trade and Industry, whose responsibility that is.
My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) reminded us of the priority that should be given to borrowing by businesses as against borrowing for home ownership. The Government recognise that priority but do not think that the two are mutually exclusive. We want to enable people to borrow for business and for owning their homes. As my hon. Friend will remember, there is unlimited tax relief for an

unincorporated business or a partner to borrow for the purposes of his business—that is considerably more beneficial than the terms for homes.
The hon. and literary Member for Newcastle upon Tyne, North (Mr. Henderson) regaled us with Shakespearean evidence of the need for greater information for the less well-off, but he did not convince many of us that his equally literary constituents would really rush off to buy a supplement to the financial statistics such as that proposed —in effect—by the new clause
The hon. Member for Clydebank and Milngavie (Mr. Worthington) rightly emphasised the importance of credit unions. I thought he spoiled another part of his case by suggesting that those who ultimately default on loans are somehow enriching those who have lent to them. That is sheer nonsense. There is a mutual interest between those who lend and those who borrow to ensure that the lending and borrowing are not excessive. It is crucial in a free society that both sides to a contract should have an interest in its success, never more so than in lending and borrowing.
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I turn now to the strange case put by the hon. Member for Islington, South and Finsbury (Mr. Smith). There were two parts to his thesis. First, he maintained that we are suffering from a consumer credit boom; and, secondly, that we have excessive interest rates. The first part of his theory is untrue. About 85 per cent. of personal credit is on mortgages on peoples's residences. We are not ashamed of the fact that considerable sums are borrowed every year by people to buy their homes. As a result of that, about 2,500,000 extra people have been enabled to become home owners since the Government came to power. Consumer credit— the 15 per cent. of personal lending that is purely for consumption—has been growing at a steady, not an accelerating, rate since the beginning of the decade. It is growing less rapidly than lending on mortgages.
The hon. Member for Islington, South and Finsbury and other hon. Members concentrated on credit card borrowing, as if that were a major aspect of the amount of credit in the economy. But less than 5 per cent. of personal borrowing is accounted for by credit cards, and of that nearly half is credit that does not bear interest because it is repaid within the time specified on the card— [Interruption.] As my hon. Friend says, a small amount is probably borne by those who are paying their Labour party subscriptions on their credit cards.
The hon. Member for Islington, South and Finsbury said that mortgages were merely a concealed form of consumer borrowing because people siphoned off the money in one way or another to buy consumer goods—although they raised it on a mortgage on the house. He presented no evidence that that was a significant part of mortgage lending and gave no sign of what the Opposition would do to prevent it.
The hon. Gentleman then turned to the second part of his thesis—that interest rates were not, as one might suppose if we were suffering from a credit explosion, too low but too high. I shall give him the opportunity to elaborate on that interesting point.

Mr. Chris Smith: I wanted to take up an earlier point that the Economic Secretary raised about house purchases and mortgages. Can he give the House an absolute and


categorical assurance that the reports in Sunday's newspapers that a paper was circulating in the Treasury which proposed a tax on property as a means of controlling house prices were wrong, and that the paper does not exist?

Mr. Lilley: I can give the hon. Gentleman a categorical assurance that he should not believe what he reads in the newspapers. That report has already been denied by my right hon. Friend the Chancellor, so it is rather strange that he should repeat it—

Mr. Smith: The statement made by the right hon. Gentleman was that there was no Government proposal, but is there a paper that puts forward such a proposal and is it being considered?

Mr. Lilley: That is a silly point. I have a piece of paper that considers the problem that we are discussing, but I do not see how that is relevant.
The hon. Member for Islington, South and Finsbury is advancing the bizarre thesis that we simultaneously have an excess of credit and credit that is too expensive. Rather than suggesting that interest rates should rise, as the logic of his case might suggest, he wants to lower interest rates. He quotes back-street lending rates of up to 4,000 per cent. a year, yet appears to deplore the greater competition that we have opened up among the reputable banks and building societies which offer a proper alternative to such shady operators at much more reasonable rates. To the extent that there is a problem of borrowing at excessive rates of interest which people cannot repay, the two answers to it are greater competition and greater information.
Since 1979, the Government have required those advertising credit to show the APR clearly and boldly on the advertisement so that people know the rate of interest that they will be paying. Under this Government, Visa and Access were referred to the Monopolies and Mergers Commission. Those are more positive and concrete acts than any proposed in the Opposition's new clause.
Having persuaded himself that the solution to excessive credit was lowering interest rates, the hon. Gentleman compounded that economic blunder by arguing that we should run not a public sector surplus, but a deficit. He derided my right hon. Friend the Chancellor for the pride that he takes in the fact that we are one of the few major countries able to repay debt rather than incur and burden ourselves with more.
The substantial expansion in home ownership, financed by increased mortgage lending, has come about because the savings of the people are no longer pre-empted by the borrowing of Governments, but are available for industry and home owners to borrow and use productively. We are reaping the benefits of that both in industry and in home ownership.
The hon. Gentleman said that the recent figures analysing the banking loans showed a tentative sign of a recovery in borrowing by manufacturing. He calls a 21 per cent. increase a tentative sign. The growth in borrowing by construction in the past year has been 38 per cent. I do not know what degree of tentativeness he would assign to that.

Mr. Major: Super-tentative.

Mr. Lilley: My right hon. Friend the Chief Secretary suggests super-tentative.
The hon. Gentleman gave us no firm signs of what he would do—not just with the present problems, but with the serious problems that could arise if he had his public sector deficit—to control private credit. He did not venture to repeat the ideas recently stated by his right hon. and learned Friend and boss the Member for Monklands, East (Mr. Smith), who, in that great journal of financial discussion and debate Woman's Own, seemed to commit the Labour party to returning to controls on capital and credit. Most people, including readers of Woman's Own, realise that control would be ineffective and unusable in a world without exchange controls, such as we happily have and will continue to have.
Hon. Members might have imagined from the debate that we were discussing a genuine and serious problem that needed a major and substantial solution. The solution proposed is simply that the Government should take powers that would enable them to introduce regulations, and in turn enable them to publish a list of the interest rates available in the market place. Such a list is already available in "Financial Statistics". The effect that it would have on consumers would be negligible. Anyone who proposes such a puny remedy cannot believe that we are suffering from a serious disease. I urge my right hon. and hon. Friends to oppose the new clause.

Mr. Chris Smith: The debate on the new clause has been extremely interesting, if only because it has revealed that the hon. Members for Eastbourne (Mr. Gow) and for Amber Valley (Mr. Oppenheim) wish to launch a savage attack upon the rectitude and wisdom of the Confederation of British Industry. Of course, that organisation is not always right, but it sometimes has a sensible point to make. Whether we like it or not, it is the voice of British industry, and for the two hon. Gentlemen to dismiss it in that way was foolish.
Those hon. Gentlemen also raised an interesting argument about the level of public borrowing, and the Economic Secretary picked it up. However, the hon. Member for Eastbourne gave the game away when I asked him whether he thought the Chancellor of the Exchequer was right in 1986 when he forecast a public sector borrowing requirement for that financial year of £4 billion. The hon. Gentleman replied that "it was the right amount for the time." Precisely. Whether a public sector borrowing requirement is or is not necessary, or to what extent the borrowing should be, is entirely dependent on what is right for the time.
For Conservative Members to commit themselves by saying that on all occasions the public sector borrowing requirement should be unnecessary and that a balance or a surplus should always be the aim, is incredibly foolish economically. I am sure that that will not happen even under this Government. The crucial point is that what is necessary and right under the circumstances of the time should be adopted in any Budget. It should not he a case of erecting a totem, as the Government appear to have done.
The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) made an especially interesting point. He mentioned the adverse impact on industry of rises in interest rates. He asked to what avail was the 2·5 per cent. rise in the base rate in recent weeks. He rightly said that it has not stopped people borrowing money or spending it,


but that it has prevented industry from making some of the advances that it might otherwise have made. Using the base rate as the only lever—it is the only lever that the Chancellor has allowed himself to control the expansion of credit—is an imperfect way of dealing with the problem. Other ways to deal with the problem of expanding credit and indebtedness need to be considered.
The Chancellor should be examining temporary credit controls, as my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) suggested, rather than dismissing them in one sentence as he did in his speech last Thursday, which was widely reported in the press. At the very least, the Government should be adopting measures such as those contained in our new clause.
We are not suggesting that the publication of lists of comparative rates will solve all the problems of the expansion of credit, but at the very least it will give consumers more information about what they are letting themselves in for. That can only be for the benefit of consumers and the overall expansion of credit, because people will be able to make more informed judgments, decisions and choices than they can presently. It is a first step and a small measure, but to dismiss it for the flimsiest of reasons, which are all we have had from the Economic Secretary and Conservative Members, is to throw away what would be a good step forward in the interests of both consumers and the economy. I commend the new clause to the House.

Question put, That the clause be read a Second time—

The House divided: Ayes 189, Noes 244.

Division No. 411]
[7.59 pm


AYES


Abbott, Ms Diane
Cousins, Jim


Adams, Allen (Paisley N)
Cox, Tom


Allen, Graham
Cryer, Bob


Alton, David
Cummings, John


Anderson, Donald
Cunliffe, Lawrence


Archer, Rt Hon Peter
Dalyell, Tam


Armstrong, Hilary
Darling, Alistair


Ashley, Rt Hon Jack
Davies, Ron (Caerphilly)


Banks, Tony (Newham NW)
Davis, Terry (B'ham Hodge H'l)


Barnes, Harry (Derbyshire NE)
Dixon, Don


Barron, Kevin
Dobson, Frank


Battle, John
Doran, Frank


Beckett, Margaret
Duffy, A. E. P.


Bell, Stuart
Dunnachie, Jimmy


Benn, Rt Hon Tony
Dunwoody, Hon Mrs Gwyneth


Bennett, A. F. (D'nt'n &amp; R'dish)
Eadie, Alexander


Bermingham, Gerald
Eastham, Ken


Bidwell, Sydney
Evans, John (St Helens N)


Boyes, Roland
Ewing, Harry (Falkirk E)


Bradley, Keith
Ewing, Mrs Margaret (Moray)


Bray, Dr Jeremy
Fatchett, Derek


Brown, Gordon (D'mline E)
Field, Frank (Birkenhead)


Brown, Nicholas (Newcastle E)
Fields, Terry (L'pool B G'n)


Brown, Ron (Edinburgh Leith)
Flannery, Martin


Buchan, Norman
Flynn, Paul


Buckley, George J.
Foot, Rt Hon Michael


Caborn, Richard
Foster, Derek


Callaghan, Jim
Fyfe, Maria


Campbell, Menzies (Fife NE)
Galbraith, Sam


Campbell, Ron (Blyth Valley)
Garrett, John (Norwich South)


Campbell-Savours, D. N.
Garrett, Ted (Wallsend)


Canavan, Dennis
Godman, Dr Norman A.


Clark, Dr David (S Shields)
Gould, Bryan


Clarke, Tom (Monklands W)
Graham, Thomas


Clay, Bob
Grant, Bernie (Tottenham)


Clelland, David
Griffiths, Nigel (Edinburgh S)


Clwyd, Mrs Ann
Griffiths, Win (Bridgend)


Coleman, Donald
Grocott, Bruce


Cook, Frank (Stockton N)
Hardy, Peter


Corbett, Robin
Harman, Ms Harriet





Hattersley, Rt Hon Roy
Mowlam, Marjorie


Haynes, Frank
Mullin, Chris


Healey, Rt Hon Denis
Murphy, Paul


Heffer, Eric S.
Nellist, Dave


Henderson, Doug
Oakes, Rt Hon Gordon


Hinchliffe, David
O'Brien, William


Hogg, N. (C'nauld &amp; Kilsyth)
O'Neill, Martin


Holland, Stuart
Orme, Rt Hon Stanley


Home Robertson, John
Parry, Robert


Hood, Jimmy
Patchett, Terry


Howarth, George (Knowsley N)
Pike, Peter L.


Howell, Rt Hon D. (S'heath)
Powell, Ray (Ogmore)


Howells, Geraint
Prescott, John


Hughes, Roy (Newport E)
Primarolo, Dawn


Hughes, Sean (Knowsley S)
Quin, Ms Joyce


Illsley, Eric
Radice, Giles


Ingram, Adam
Reid, Dr John


Janner, Greville
Richardson, Jo


John, Brynmor
Robertson, George


Jones, Martyn (Clwyd S W)
Robinson, Geoffrey


Kaufman, Rt Hon Gerald
Rogers, Allan


Kirkwood, Archy
Rooker, Jeff


Lambie, David
Ross, Ernie (Dundee W)


Leadbitter, Ted
Rowlands, Ted


Leighton, Ron
Salmond, Alex


Lestor, Joan (Eccles)
Sedgemore, Brian


Lewis, Terry
Sheerman, Barry


Litherland, Robert
Sheldon, Rt Hon Robert


Livsey, Richard
Shore, Rt Hon Peter


Lofthouse, Geoffrey
Skinner, Dennis


Loyden, Eddie
Smith, Andrew (Oxford E)


McAllion, John
Smith, C. (Isl'ton &amp; F'bury)


McAvoy, Thomas
Snape, Peter


McCartney, Ian
Steel, Rt Hon David


Macdonald, Calum A.
Steinberg, Gerry


McKelvey, William
Strang, Gavin


McLeish, Henry
Taylor, Matthew (Truro)


McNamara, Kevin
Thompson, Jack (Wansbeck)


McTaggart, Bob
Turner, Dennis


McWilliam, John
Vaz, Keith


Madden, Max
Wall, Pat


Mahon, Mrs Alice
Wardell, Gareth (Gower)


Marek, Dr John
Wareing, Robert N.


Marshall, Jim (Leicester S)
Welsh, Andrew (Angus E)


Martin, Michael J. (Springburn)
Welsh, Michael (Doncaster N)


Martlew, Eric
Wigley, Dafydd


Maxton, John
Williams, Rt Hon Alan


Meacher, Michael
Williams, Alan W. (Carm'then)


Meale, Alan
Winnick, David


Michael, Alun
Wise, Mrs Audrey


Michie, Bill (Sheffield Heeley)
Worthington, Tony


Millan, Rt Hon Bruce
Wray, Jimmy


Mitchell, Austin (G't Grimsby)



Morgan, Rhodri
Tellers for the Ayes:


Morley, Elliott
Mr. Allen McKay and Mrs. Llin Golding.


Morris, Rt Hon A. (W'shawe)



Morris, Rt Hon J. (Aberavon)





NOES


Aitken, Jonathan
Blaker, Rt Hon Sir Peter


Alexander, Richard
Body, Sir Richard


Alison, Rt Hon Michael
Bonsor, Sir Nicholas


Allason, Rupert
Boscawen, Hon Robert


Amess, David
Bowden, A (Brighton K'pto'n)


Amos, Alan
Bowden, Gerald (Dulwich)


Arbuthnot, James
Bowis, John


Arnold, Jacques (Gravesham)
Boyson, Rt Hon Dr Sir Rhodes


Ashby, David
Braine, Rt Hon Sir Bernard


Atkinson, David
Brandon-Bravo, Martin


Baker, Nicholas (Dorset N)
Brazier, Julian


Banks, Robert (Harrogate)
Bright, Graham


Batiste, Spencer
Brooke, Rt Hon Peter


Beaumont-Dark, Anthony
Browne, John (Winchester)


Beggs, Roy
Buchanan-Smith, Rt Hon Alick


Bellingham, Henry
Burns, Simon


Bendall, Vivian
Burt, Alistair


Bennett, Nicholas (Pembroke)
Butcher, John


Benyon, W.
Butler, Chris


Biggs-Davison, Sir John
Butterfill, John


Blackburn, Dr John G.
Carlisle, John, (Luton N)






Carlisle, Kenneth (Lincoln)
Jones, Gwilym (Cardiff N)


Carttiss, Michael
Jones, Robert B (Herts W)


Cash, William
Jopling, Rt Hon Michael


Clark, Dr Michael (Rochford)
Kellett-Bowman, Dame Elaine


Clark, Sir W. (Croydon S)
Key, Robert


Colvin, Michael
Kilfedder, James


Coombs, Anthony (Wyre F'rest)
Knapman, Roger


Coombs, Simon (Swindon)
Knight, Dame Jill (Edgbaston)


Cope, Rt Hon John
Knox, David


Couchman, James
Lamont, Rt Hon Norman


Cran, James
Lawrence, Ivan


Critchley, Julian
Lawson, Rt Hon Nigel


Currie, Mrs Edwina
Lennox-Boyd, Hon Mark


Curry, David
Lester, Jim (Broxtowe)


Davies, Q. (Stamf'd &amp; Spald'g)
Lilley, Peter


Davis, David (Boothferry)
Lord, Michael


Day, Stephen
Maclean, David


Dickens, Geoffrey
McLoughlin, Patrick


Dorrell, Stephen
Major, Rt Hon John


Douglas-Hamilton, Lord James
Maude, Hon Francis


Dover, Den
Maxwell-Hyslop, Robin


Dunn, Bob
Meyer, Sir Anthony


Durant, Tony
Mills, Iain


Dykes, Hugh
Miscampbell, Norman


Evans, David (Welwyn Hatf'd)
Moate, Roger


Evennett, David
Monro, Sir Hector


Farr, Sir John
Morrison, Sir Charles


Favell, Tony
Moss, Malcolm


Fenner, Dame Peggy
Neale, Gerrard


Fookes, Miss Janet
Needham, Richard


Forman, Nigel
Nelson, Anthony


Forsyth, Michael (Stirling)
Neubert, Michael


Forth, Eric
Nicholls, Patrick


Franks, Cecil
Nicholson, David (Taunton)


Freeman, Roger
Nicholson, Emma (Devon West)


French, Douglas
Oppenheim, Phillip


Gale, Roger
Page, Richard


Garel-Jones, Tristan
Paice, James


Gill, Christopher
Patnick, Irvine


Goodhart, Sir Philip
Patten, John (Oxford W)


Goodson-Wickes, Dr Charles
Pawsey, James


Gow, Ian
Peacock, Mrs Elizabeth


Gower, Sir Raymond
Porter, David (Waveney)


Grant, Sir Anthony (CambsSW)
Portillo, Michael


Greenway, Harry (Ealing N)
Powell, William (Corby)


Greenway, John (Ryedale)
Price, Sir David


Gregory, Conal
Raffan, Keith


Griffiths, Sir Eldon (Bury St E')
Raison, Rt Hon Timothy


Griffiths, Peter (Portsmouth N)
Rathbone, Tim


Grist, Ian
Redwood, John


Ground, Patrick
Rhodes James, Robert


Grylls, Michael
Riddick, Graham


Gummer, Rt Hon John Selwyn
Ridley, Rt Hon Nicholas


Hanley, Jeremy
Ridsdale, Sir Julian


Hannam, John
Roberts, Wyn (Conwy)


Hargreaves, A. (B'ham H'll Gr')
Roe, Mrs Marion


Hargreaves, Ken (Hyndburn)
Rost, Peter


Harris, David
Rowe, Andrew


Haselhurst, Alan
Ryder, Richard


Hawkins, Christopher
Sackville, Hon Tom


Hayhoe, Rt Hon Sir Barney
Sainsbury, Hon Tim


Heathcoat-Amory, David
Sayeed, Jonathan


Heseltine, Rt Hon Michael
Shaw, David (Dover)


Hicks, Mrs Maureen (Wolv' NE)
Shaw, Sir Giles (Pudsey)


Hicks, Robert (Cornwall SE)
Shaw, Sir Michael (Scarb')


Higgins, Rt Hon Terence L.
Shelton, William (Streatham)


Hill, James
Shephard, Mrs G. (Norfolk SW)


Holt, Richard
Shepherd, Colin (Hereford)


Hordern, Sir Peter
Shepherd, Richard (Aldridge)


Howarth, G. (Cannock &amp; B'wd)
Shersby, Michael


Howell, Rt Hon David (G'dford)
Skeet, Sir Trevor


Hughes, Robert G. (Harrow W)
Smith, Sir Dudley (Warwick)


Hunt, David (Wirral W)
Smith, Tim (Beaconsfield)


Hunter, Andrew
Soames, Hon Nicholas


Hurd, Rt Hon Douglas
Speed, Keith


Irvine, Michael
Speller, Tony


Irving, Charles
Squire, Robin


Jack, Michael
Stanbrook, Ivor


Janman, Tim
Stanley, Rt Hon John


Johnson Smith, Sir Geoffrey
Steen, Anthony





Stern, Michael
Walker, Bill (T'side North)


Stevens, Lewis
Waller, Gary


Stewart, Allan (Eastwood)
Walters, Sir Dennis


Stewart, Andy (Sherwood)
Ward, John


Stokes, Sir John
Wardle, Charles (Bexhill)


Stradling Thomas, Sir John
Watts, John


Sumberg, David
Wells, Bowen


Summerson, Hugo
Wheeler, John


Taylor, John M (Solihull)
Whitney, Ray


Taylor, Teddy (S'end E)
Widdecombe, Ann


Temple-Morris, Peter
Wiggin, Jerry


Thompson, Patrick (Norwich N)
Wilkinson, John


Thorne, Neil
Wilshire, David


Thornton, Malcolm
Winterton, Mrs Ann


Thurnham, Peter
Winterton, Nicholas


Townend, John (Bridlington)
Wood, Timothy


Townsend, Cyril D. (B'heath)
Woodcock, Mike


Tracey, Richard
Yeo, Tim


Trippier, David
Young, Sir George (Acton)


Trotter, Neville



Twinn, Dr Ian
Tellers for the Noes:


Waddington, Rt Hon David
Mr. Peter Lloyd and Mr. David Lightbown.


Walden, George

Question accordingly negatived.

New clause 5

STATUTORY RESERVE

`(1) In computing the profits of the trade of a company to which this section applies for the purposes of Corporation Tax, there shall be allowed as a deduction any amount transferred to a Statutory Reserve following within subsection (3) below.—[Dr. Marek.]

Brought up, and read the First time.

Mr. Andrew Smith: I beg to move, That the clause be read a Second time.
The purpose of the new clause is to enable common ownership co-operatives to secure exemption from corporation tax for allocations to a statutory reserve. I emphasise at the outset that the reserve that we are discussing would be non-distributable. That is in line with the basic definition of the purpose of common ownership co-operatives as those in which the assets of the co-operation may not be distributed to members when the co-operative is dissolved or at any other time. The new clause would not, therefore, benefit directly particular groups of individuals. It would not be a tax break whereby members of the co-operative would avoid corporation tax. It would be an incentive to investment in the co-operative and would encourage the growth of that form of enterprise by enabling it to build up its capital more easily than it can at present.
In doing that, we would not give co-operatives any preferential treatment or unfair advantage. On the contrary, we would merely go some way to removing the unjustified handicaps under which workers' co-operatives presently labour. The principal handicap is that co-operatives do not, by their nature, enjoy the corporation tax relief on distribution through what is called the imputation system. For that reason, when that system was introduced in 1972, a special rate was applied to co-operatives, as it was to small firms, and they were therefore put on an equal footing with larger private enterprises.
8.15 pm
The problem is that, while all companies continue to benefit today from the relief on distributed profits, the concessionary rate has not, since the Finance Act 1984, applied to co-operatives and they are therefore effectively penalised by having to pay the full corporation tax rate.

Mr. Hanley: Will the hon. Gentleman tell the House whether the statutory reserve would include a capital redemption reserve or a share premium account?

Mr. Smith: It would certainly not include a share premium account. The purpose is to build up the capital on which the co-operative itself can draw for future investment and, for example, for training purposes.
The co-operatives are further penalised through the obvious reason of being ineligible for the business expansion scheme, which we have debated a great deal in respect of this Bill. The new clause is intended to put them on an equal footing, not to give them any particular advantage, although there are other grounds on which that advantage could be defended and advocated. The argument is based on plain fairness and equity, of which I hope Conservative Members will see the merit.
The new clause is necessary for other reasons. Co-operatives, like other small businesses, especially those attempting to grow quickly, find capital difficult to attract and retain. That applies particularly to co-operatives because they do not have recourse to equity share capital. Moreover, as the law on corporation tax presently stands, workers' co-operatives have, if anything, a perverse incentive to increase wages, rather than to retain profits, to minimise tax liability. The new clause would therefore give a boost to investment, enterprise and growth in workers' co-operatives. Not to support the clause would be to concede that enterprise and initiative are all very well and much to be encouraged, except when they apply to workers in common ownership of their business, as opposed to conventional capitalist institutions.
The extension of the capital base provided by the new clause would also bring substantial knock-on benefits by enabling workers' co-operatives to take advantage of private sources of finance through the improvement in their gearing position brought about by the new clause. It would also address the problem faced by many of those people drawn particularly to the co-operative mode of organisation, who are especially short of funds. The co-operative form of organisation has a particular attraction for unemployed people who have had little or no resources to invest in the business. The clause would therefore be of special benefit to them, as it would be to co-operatives organised by women and ethnic minorities, who almost certainly comprise a larger proportion of the membership of co-operatives than they do of company shareholders.
The new clause would also make a significant contribution to job generation. To date, we in Britain have been talking about relatively small numbers of workers' co-ops, but they have been expanding at an impressive rate. There were 220 new ones last year and we see much evidence of demand for more support for co-ops.
In my constituency I am pleased to see that the Oxfordshire co-operative development agency, in conjunction with a number of other co-operative development agencies across south-east England, has been able, in conjunction with local authorities and the EEC social

fund, to put substantial investment into training people in co-operative organisation and enterprise. That has had a quick and good take-up rate and a great deal more of the same could be done were the co-ops in a more advantageous position for raising capital.
If we really want to see just how big is the potential for growth in workers' co-ops, we must look abroad. For example, Italy has more than 15,000 co-ops. In Europe the total number employed in workers' co-ops has been estimated to be about 600,000. The fact that the new clause would bring us into line with Europe is another powerful argument in its support.
There is no doubt that among the many factors that have favoured more widespread growth of co-operatives in Europe has been the more sympathetic tax treatment that they receive and which has counted for a lot. In Italy, workers' co-ops benefit from precisely the form of exemption from undistributed reserves that we are advocating in the new clause. In France they enjoy partial exemption. We heard a good deal in Committee about 1992 and the importance of harmonisation. This is one area in which Opposition Members would welcome harmonisation with the more progressive practices being adopted in other EEC countries.
There are good grounds of equity, enterprise, the benefits of job generation and parity with our European partners for accepting the new clause, enabling worker co-ops to make contributions to an undistributable reserve, free from corporation tax.
The benefits of the co-operative mode of organisation which flow from the involvement and commitment of worker members, of local control, enhanced job satisfaction and a happier working life, are increasingly recognised across the political spectrum.
The new clause is an opportunity for Conservative Members, some of whom have taken a sympathetic interest in this area, to recognise that there are anomalies and that co-operatives are worth encouraging. The Government should at least give an undertaking to examine this area afresh, even if they are not prepared to accept the precise form of the new clause.
The House will be aware that representations have been made in the past not merely from the workers' movement but from the Co-operative Union on behalf of the retail movement, again because of the substantial disadvantages that recent changes in the corporation tax regime have meant for them. Supportive and sympathetic action is long overdue in this area on grounds of equity and fairness as well as because of the benefits of the co-operative mode of organisation that I have already described.
If we in the Labour party had our way, we would be bringing forward a battery of measures to encourage and assist co-operative developments. Instead, all we are asking for tonight is a relatively small and inexpensive change, but one of substantial benefit to a sector of the economy that has not enjoyed the largesse being handed out in other directions. It has more than earned the boost that the new clause would give it.

Mr. John Battle: I want to say a few words in support of my hon. Friend the Member for Oxford, East (Mr. Smith). I am proud to be able to say that Leeds has a long-standing record of support for co-ops, not least because the Industrial Common Ownership Movement is based in Leeds.
It is interesting that throughout this century there has been little inward investment in Leeds. Most of the commercial and industrial development has been home grown and home based. That might be why Leeds has developed a strong base of locally grown co-ops.
One of those co-ops, Up-routes Removals Co-operative Ltd., is involved in the transportation industry, again a traditional industry in Leeds. It started on the bridge of the market town, the hub of the Yorkshire textile industry, processing textiles and transporting them throughout Britain, providing a convenient location for communications. It is a worker co-operative providing useful employment for some of my constituents. It is a member the Industrial Common Ownership Movement, the national federation of worker co-ops, based in Leeds.
The Up-routes Removals Co-operative has petitioned me to back a submission on taxation changes to assist the development of worker co-ops, which I am sure the Chancellor of the Exchequer and the Treasury will have received. It made the strong recommendation that
profits which are allocated to a reserve fund in a co-op should not bear Corporation Tax if these monies can never be distributed to members. This relief, available to co-ops in France and Italy"—
as my hon. Friend has said—
would help us to build up our capital base
Most people who have had any dealings with co-ops, directly or indirectly, will be aware that raising capital creates a problem since co-operative constitutions do not provide for share capital. Although the worker co-op movement has its own financial institutions, their lending capacity is small.
In 1987, one of the largest of those financial institutions, Industrial Common Ownership Finance, raised £500,000 by way of private contributions to invest in worker co-ops. Obviously that is not sufficient to carry things forward. People who have never been involved in the establishment of co-ops often do not realise exactly what they are up against in establishing themselves and developing.
I remember going to a bank with a small co-op. The bank could not conceive that the co-op had a complex financial and management structure based on the co-operative system. The bank told the co-op to come back as a traditional business, when it might be able to deal with it. The bank was not prepared to accept the principles of the co-operative movement. Thus, the traditional means of raising finance are sometimes closed.
I hope that the Government will accept this relatively non-contentious new clause. In other areas of policy the Government push the co-operative movement as a good thing. Scarcely a week goes by without a Minister suggesting that housing co-ops should be established, and they are part of the same family of the co-operative movement. I hope that the Government will accept the new clause, making it financially possible for co-ops to get on the move. They need practical support and I hope that the Government will enable this sector of the economy to flourish.
This is a small-scale measure, but co-ops can provide help to local economies, particularly where there is long-term structural unemployment in areas with

declining industries. The co-ops have a role to play in local economies and I hope that the Government will take this practical step towards enabling them to flourish.

The Paymaster General (Mr. Peter Brooke): May I say in response to the generality of the issue in the new clause that the Government believe that co-operatives are a thoroughly valid form of private enterprise and deserve every encouragement. We also recognise that cooperatives may be a valuable way of achieving the involvement of employees in the affairs of the company in which they work. We believe that measures designed to assist business generally should also be open to co-operatives.
The purpose of new clause 5, to which the hon. Member for Oxford, East (Mr. Smith) spoke, is to allow a co-operative that expects to make a substantial investment in the future to obtain tax relief on funds put aside to meet that future expense. The hon. Member for Oxford, East may query that precise wording, but that is a fair description of new clause 5.
8.30 pm
I am not sure whether the hon. Member for Oxford, East made clear what would happen when the future investment was made. However, I assume from the terms of an amendment tabled in Committee, but not selected, that the intention is that the amount invested would be charged to tax. The main effect of the provision would be to allow the co-operative to use the money which would otherwise have been paid in tax. For example, if the money was put aside in year one and invested in year three, the co-operative would have the use of the money for two years. That might reduce its borrowing and interest payments, or the money might be placed on deposit and earn interest.
It is not immediately clear why co-operatives should be favoured in that way. From time to time all businesses may need to accumulate money for future investment and all face the same tax regime. They pay tax on their profits. When they make their investment, they may well qualify for capital allowances. That produces a fair result.
If the law were amended in the way suggested in new clause 5, a co-operative's tax liability would depend on whether it intended to carry out future investment. Such intention may be firm and precise or tentative and vague. It would be extremely difficult for the Inland Revenue to know whether an intention was sufficiently clear that tax relief should be given. The alternative would be to give tax relief without the co-operative having to establish a clear intention to make the investment. That would allow a co-operative, if it was so minded, to use the statutory reserve fund for tax avoidance. I am sure that the hon. Member for Oxford, East would agree that that would be wrong.
More generally, special reliefs of this kind run counter to our business tax policy.

Mr. Battle: The Paymaster General says that reliefs of this kind run counter to Government policy. Would it not be preferable to give a boost to the co-operative movement in the same way that a boost has been given to housing developments for landlords through the business expansion scheme,? It seems that there is a conflict in policy when the business expansion scheme can go ahead under the Budget, but the Paymaster General claims that he cannot give relief to co-operatives.

Mr. Brooke: The hon. Member for Oxford, East mentioned the business expansion scheme, and I intended to respond to that.
Our business tax policy is to remove, or substantially modify, incentive reliefs of this kind, which distort business behaviour and complicate the tax system. The hon. Member for Oxford, East raised a question about the tax imputation system. That system, which in effect means that shareholders receiving dividends do not have to pay income tax at the basic rate, is designed to reduce the double taxation of distributed profits that occurred under the classical system of corporation tax in force until 1972. For retained profits, co-operatives are taxed in the same way as companies, and we believe that that is fair.
In the submissions made to the Government this year, the Industrial Common Ownership Movement suggested that income tax relief should be given to investors who invest money in the loan stock of workers' co-operatives so that such investors are put on a similar footing to those investing in companies under the BES. However, the BES was introduced with the specific aim of helping unquoted trading companies raise new equity, so that, among other things, they need not be overdependent on loan finance. The proposal to allow income tax relief on money loaned to co-ops would run directly contrary to that objective.
I want now to refer to the progress made by the co-operative movement. Section 25 of the Finance Act 1981 provides for tax relief on interest on loans to buy shares in a co-operative. The Co-operative Development Agency, which the Government sponsor, has produced statistics to illustrate the significant growth of worker co-operatives over recent years, to which the hon. Member for Oxford, East referred. It estimates that there were 200 such co-operatives in 1980, and the figure for this year is 2,000. That argues that there has been very satisfactory growth during the 1980s. I salute that progress. However,I cannot commend new clause 5.

Mr. Andrew Smith: I thank the Paymaster General for his recognition that workers' co-operatives are a valid form of enterprise. I also welcome his cognisance of the valuable work and contribution made by those co-operatives. However, I found the right hon. Gentleman's reply wholly unconvincing. It did not support the Government's commitment to co-operatives in principle, which we have welcomed, by any direct action on tax anomalies.
The Government are trapped, and appear to want to be trapped, in a circular argument. They seem to say that because workers' co-ops do not have a conventional capitalist share equity, they cannot benefit from the BES and that the tax imputation system on corporation tax does not apply to them. That means that, because they are co-operatives, they do not have access to the advantages and the assistance which the Government are giving through the BES.
I have said that there is a whole battery of other measures that we would like to implement to encourage co-ops. The thrust of my argument was that such action is necessary merely to place co-operatives on a par and a fair, level playing field with other organisations.
While we will not divide the House on this issue, the House can rest assured that Labour Members will return to this matter in future. We believe that there is strong and growing public support for workers' co-operatives as a means of harnessing people's energy, commitment and

enterprise in a way that is fair for all workers as they do not merely leave power in the hands of those who control share capital and the sources of finance. It is liberating being involved in a co-operative. They make a real contribution to the economy and the well-being of the individual. We therefore give a firm undertaking that we will return to this issue.

Question put and negatived.

New Clause 10

TAXATION SERVICES

`(1) Any person who conducts a business which includes the provision of taxation services shall be required to be registered with the Inland Revenue in accordance with Regulations to be drawn up by the Board.

(2)"Taxation services" includes advice and work done in connection with computational matters as well as advice and work in connection with tax mitigation and avoidance and includes the circulation of literature or the placing of advertisements which make any reference to tax savings or tax advantages to be gained from any product or service.

(3)The Regulations shall include the requirement to file with the Inland Revenue and the Library of the House of Commons any literature, brochure, advertisement or other communication of a general nature issued in the course of the conduct of such business.'.—[Dr. Marek]

Brought up, and read the First Time.

Dr. Marek: I beg to move, That the clause be read a Second time.
As a result of the Budget and the Finance Bill, the remaining stages of which we are debating, the top 1 per cent. of the population gained more in income tax than the bottom 70 per cent. That is astounding. Perhaps people in the country at large do not realise that that has happened. If they did, their perception of the Budget's effects, which are not very great, contrary to the Government's expectation in March, would be even lower than it is now.
On average, since 1979, the top I per cent. have gained £100,000 in tax cuts, and, as a result of the Budget and the Finance Bill, they will gain another £10,000 each. Yet the average pay and average tax paid by ordinary men and women in the street have risen, because tax, as a proportion of GDP, was lower in 1979 than it is now. It was about 34 per cent. in 1979, and it is now 38 per cent. The average person in the street has not benefited from Tory tax-cutting policies. The Tory party cannot be regarded as a tax-cutting party. It is a taxing party for 90 per cent. of the population, and it is neutral for the remaining 5 per cent. It is a tax-cutting party for the super-rich—the top tax payers and the top income earners.
Our new clause represents an attempt to limit the extra tax avoidance that the super-rich enjoy, on top of all the benefits that the Government have given them in the form of tax cuts and other incentives to avoid paying tax. It is an attempt to limit avoidance by giving the country more information and by making tax advisers register as tax advisers and deposit in the House of Commons Library and with the Inland Revenue all the schemes and advice that is given to extremely wealthy people—the super-rich —so that they can avoid paying tax. Opposition Members are quite sure that if there were knowledge of what goes on in the tax avoidance industry, the country would not put up with such practices, and the Government would be forced to bring in far more tax avoidance measures.
I do not suggest that the Government and the Financial Secretary are not interested in tax avoidance measures. They are. I criticise the Government and the Financial


Secretary because their perception of what is and is not allowable is wrong. The line has been drawn too far to one side. We should like to draw it a long way further back towards the middle ground.

Mr. Christopher Gill: Is the hon. Gentleman aware that the Budget has dealt a serious blow to the tax avoidance industry and that many people who were involved in that sector of the economy now find themselves almost out of work?

Dr. Marek: If the hon. Gentleman were close enough to me, he would see tears rolling down my cheeks. Perhaps he could give us a few more details about exactly what the Government have done and about what type of tax adviser, rich person or top income tax payer is now out of work. I do not believe that that is the effect of the Budget. If the hon. Gentleman knows something different—this is the Report stage, and we have plenty of time—I shall be delighted to give way to him again so that he may enlighten the House on precisely what he means.
I make it absolutely clear that the Budget has not benefited the super-rich only because of the income tax concessions. It has benefited them because of the capital gains tax concessions also. Only a few of the rich will benefit from the rebasing of the capital gains tax. It is fair to say that the capital gains tax has been increased to 40 per cent. for the small band of very wealthy income-receiving people.
I welcome that, and I am not afraid to say so. By and large, the Government have given real gifts in the form of capital gains tax, because of the rebasing provisions. It is obscene that the richest will benefit from the lowering of the inheritance tax rate from 60 per cent. to 40 per cent. The rate has gone up for those who paid inheritance tax at the rate of 30 per cent., but they are not super-rich, they are perhaps only moderately rich. The Government do not look after them; they look after the super-rich. I wonder whether the country knows exactly what is going on and what advice the tax advice industry is giving to such people.

Mr. Winnick: Is there anything strange in what has occurred? But the Tory party is in politics to look after the interests of the very rich. It always has done so and always will. Once it has a majority in the House of Commons, why should it not look after its friends?

Dr. Marek: One can certainly look after one's friends. We all should look after our friends. We are all on the same planet, and we are all human beings. But the Tory party looks after its friends at the expense of other people who should be its friends. That criticism can be levelled against the Tory party.
8.45 pm
I shall show that, in spite of all the tax cuts and changes in the inheritance tax bands and in capital gains tax, there are still tax avoidance schemes. They are still as plentiful as ever. Although they say that they try to do something about them, the Government still allow them to continue. Tax avoidance schemes provide even more benefits for the rich and the super-rich, on top of all the benefits that they received in the Budget.
Tax evasion—not avoidance—seems to be out of control. There seems to have been a seven fold increase

since 1979, yet the Government are not prepared to appoint enough tax collectors and tax inspectors. If they were to do so, the money that they would expend on the training and appointment of such officers would be repaid by the lessening of tax evasion and the extra revenue that the Treasury would receive. The Government do not do that. That is inexplicable, except on the basis that they look after their own friends to the exclusion of everyone else.
The effect of our new clause would be to place tax advice on record in the Library of the House of Commons. It would make the job of the Inland Revenue a little easier. Of necessity, various tax advice institutions, companies and individuals would send all their literature and advice to the Inland Revenue. The public would have a greater awareness. As a result, the Government would be forced to act and bring forward more anti-tax avoidance schemes and measures than they have so far.
In the past nine years, many tax advisers and consultants have done well out of the Government. People have been appointed as consultants left, right and centre. I do not criticise that. There is probably something in it. The Government should know what the poacher is doing. I do not use the gamekeeper-poacher analogy in any disrespectful way. Institutions and people have benefited from the underwriting that has taken place as a result of the Government's privatisation measures. They have reason to thank the Government, but they should not thank the Government for not finding out what advice they give their clients about how to avoid paying taxes. It is the duty of every individual to pay his or her taxes—not more than they must pay, but they should pay a fair amount. If there are loopholes, boltholes and tax havens, the Government should know about them and do
I shall give the House some examples. The first is the business expansion scheme—a clear loophole. Clear abuse is made of that scheme. It represents about £85 million of lost revenue per year. It is used not to create wealth for industry but to plough money into hotels for the homeless. Is that what the scheme was invented for in the first place? If not, the Government should do something about it. The scheme is being used to fund private hospitals and, at the same time, run down the National Health Service. As a result, the National Health Service has become two-tiered.
The scheme is being used also to fund nursing homes and even private schools. A taxpayer with an income of £40,000 should at the top rate pay £16,000, but he can wipe out his liability by funnelling that money into an approved business expansion scheme. If the Government could show that those schemes contribute to industry, to manufacturing production, to wealth creation, or to increasing employment, I would not be saying what I am. However, we believe that those schemes are squalid, shabby tax boltholes that ought to be stopped by the Government at the first opportunity.
The second loophole exploited by the super-rich is enterprise zones. Pop stars, the idle rich and the very wealthy have all been able to set unlimited funds against their tax liabilities by leasing factory units and then renting them out. They are not factory units that they have inspected and which they feel will help to provide wealth in depressed areas or in regions of high unemployment. They have not even seen those factories, but by leasing and then renting out such units, they avoid their tax liabilities.
The resulting forgone tax revenue does not go to depressed areas or to enterprise zones either, because it is


siphoned away by the super-rich for their own purposes. Probably, they do not even live in this country. Areas desperately needing investment do not receive it. It now costs about £30,000 to create one job, and the discontinued regional development grants created jobs for a lot less money than that. It is estimated that £60 million per annum is lost in that way.
Our new clause would compel all those who advise pop stars and the idle rich to commit their advice to paper, and then that information would be placed in the Library so that we could all read it. We could then communicate in turn to the public what is happening in the financial life of this country, and I believe that there would be public revulsion at some of the practices that the Government allow.
Executive share option schemes were introduced by the Government in the Finance Bill 1984. About £100 million per annum is lost through such schemes. Some schemes are available to all employees, but the majority of them are designed for executives. They benefit the 50,000 top-paid executives who are able to buy options if the market goes up, as it did. The market can also go down, but in the long term, it usually goes up. Those executives are able to take up their options after three years and then enjoy their capital gains.
Those gains are not achieved through hard work or because of any increased profits, but are the result of the perception of the City and of international capital as to what are the prospects of enjoying a good rate of return from this country in the near future. I do not refer to the long term, because there the time scale is too long. I am sure that you, Mr. Deputy Speaker, will rule me out of order if I dwell too long on that subject, although I may say that the long-term future for this country is not very sound.
Bed-and-breakfasting is another area of activity that the super-rich can use that is not open to the man in the street. The Financial Secretary to the Treasury nods his head—I suppose that the ordinary man in the street can benefit from it, but in practice it is something from which the rich really benefit. If the Government would go some way to meeting the new clause, it would be shown whether it is the ordinary man in the street who exploits bed-and-breakfasting in selling his British Airways shares, or whether it is the rich and the institutions who actually make use of that technique. If the Financial Secretary can tell me who does, I shall be delighted to know.
My final example is that given by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chief Secretary. His question to the Chancellor was answered by the Financial Secretary to the Treasury. My hon. Friend asked:
if he will estimate the tax liability in respect of the tax year 1988 of a married man aged 51 with no dependent children who is in receipt for that year of a salary from his employer of £1 million"—
there are a few such people around—
assuming he has a mortgage of £30,000, a BES investment of £40,000, an investment of £810,000 in a new enterprise zone unit trust of which 94 per cent. is attributable to building costs and where 50 per cent. of the purchase price is borrowed in circumstances where guaranteed rent receivable equals the interest outgoing, and who makes a contribution to a retirement annuity scheme amounting to £195,000.
That is some form of tax avoidance scheme.
Hon. Members may guess at the answer to the question and how much tax that wealthy person will pay. The

Financial Secretary gave a holding answer on 12 April because clearly he had to consult his tax advisers. On 18 April he replied:
Liability to income tax in 1988–89 would be nil."— [Official Report,18 May 1988; Vol. 133, c. 503–504]
That is what our new clause is all about. Tax avoidance measures are being used not by ordinary men and women in the street but by the super-rich, who are so wealthy that the average person cannot dream what type of lives they have and what considerations shape their thoughts during the working day.
The country could do with knowing more about the tax avoidance industry. It is not one that creates wealth for the country but that creates wealth for the idle and the super-rich. Let us have no more headlines of the kind that appeared in the Evening Standard on 12 July—
The great British tax haven"—
as if that were the sum total and the whole aim of the present Conservative Administration—not a country creating wealth through productive industry, hut a tax haven. As to the vain hope that the idle rich will come to this country and pay their taxes here, time will tell who is right about that. Let us have no more headlines of the kind that appeared in The Sun on 16 March:
Lotsa lovely lolly. Lawson cuts taxes for all.
There is now a sour taste to that tax-cutting, given the 2·5 per cent. hike in interest rates and the fact that for the average person, any tax cut has now been taken away by the increased mortgages that are about to be imposed. Let us have no more headlines such as
Burton boss"—
I shall not read the next words—
is £5,000 a week better off".
That is immoral and obscene, and cannot be justified by any Government.
I have here a book that I should like to recommend to the Financial Secretary. It is called "The Rich and the Super-Rich", by Ferdinand Lundberg. I thought that the Financial Secretary would appreciate it. It has an excellent chapter on "The Great Tax Swindle", with sections headed "Tax-free Fortune Building", "How to Get Rich by Not Paying Taxes" and "The Baited Trap"—which explains how to
set up the public for the big tax swindle"—

Mr. Winnick: If my hon. Friend goes on, all Tory Members will want a copy.

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Dr. Marek: The book is about 20 years old. Things have changed since then.
Another heading is "Valuable Wives". I need not remind the House that, with the disaggregation of income and capital taxation, wives will become valuable to the super-rich. The position has changed for the worse rather than for the better. Other sections are headed "Tax Support for Rich Children", "Other Ways of Income Splitting" and "Additional Tax Dodges", and there are six or seven more sub-headings in the chapter.
The book dwells more on the American than on the British experience, but the introduction is relevant to Britain. Perhaps we could dwell on this story another time. The Government take pride in saying that our present fiscal regime is more like America's than that of any other European country. The second paragraph on page 9 of the book reads as follows:
Thus the picture is of a society where the rich, despite a well-publicized and apparently stringent tax regime, continue


to pre-empt a very large share of society's resources in the United Kingdom, while the poor and the moderately well-off, though relieved of much of the pre-war burden of heavy unemployment"—
times have moved on: we cannot say that any longer—
and with their incomes boosted by the earnings of working wives, have in fact failed to capture any significantly larger share of life's good things for themselves. Certainly there are many more good things; but that is not quite the point. And for the really poor, particularly the old and lonely, the whole equality notion has a pretty sour ring.
The new clause is a small crumb—a small step towards bringing morality back to the governance of our affairs —but I commend it to the House.

Mr. Hanley: Some of us who have been listening to the hon. Member for Wrexham (Dr. Marek) may feel that this is the first time that the new clause has been discussed properly. The hon. Gentleman's diatribe was more an argument against reducing rates of taxation than in explanation of the new clause.
I must declare my interest as the parliamentary adviser to the Institute of Chartered Accountants in England and Wales. I have been a chartered accountant for nearly 20 years, and I strongly disagree with the hon. Gentleman. What he is really saying is that it is wrong to be accurate, and wrong to seek advice on the law. The hon. Member for Walsall, North (Mr. Winnick), who is no longer in the Chamber, shouted from a sedentary position at many points in his hon. Friend's speech. Would he say that it is wrong to seek guidance on immigration law? How about those who give advice on social security benefits? Is it wrong for citizens advice bureaux to give advice? I think it entirely right for the United Kingdom Immigrants Advisory Service, of which the hon. Member for Walsall, North is chairman, to give proper advice on the law as it stands.

Dr. Marek: If the hon. Gentleman reads tomorrow what I said in my speech, he will see that I did not criticise the seeking of advice. But it is the duty of Government to stop tax avoidance when they feel that there are too many loopholes, or that the line has been drawn too far.

Mr. Hanley: If the hon. Gentleman had stayed on that tack throughout his speech, I would have welcomed it. He mentioned briefly that the advantages of forestry had been removed in the last Budget, and I am sure that the Government will remove any other so-called loopholes that are patently immoral. But he has not answered the question whether it is right to give advice on this branch of law. He cast all sorts of aspersions on those who give tax advice, as if to say that giving advice to a person who merely happens to be wealthy is wrong, but it is right to advise those who are not wealthy. That is a strange, twisted argument, which I am not prepared to support.
Every shopkeeper—how many shopkeepers can be genuinely classed as wealthy?—needs and should seek advice on the accuracy of their accounts, and therefore their taxation. All tax advisers —no, all good tax advisers—greatly help the Inland Revenue with the collection of data. If it were not for those who help individuals to calculate an accurate tax assessment, the Inland Revenue would have to spend millions, if not billions, of pounds calculating the correct amount of taxation. I am certain that the Inland Revenue would hate to see the demise of this industry which the hon. Gentleman seems to dislike so much.
I turn to another point about the new clause and to what the hon. Gentleman called his hideous threat to kill off the taxation industry. Let us analyse that threat. The hon. Gentleman suggests that every organisation giving tax advice must send one copy of any generally issued statement of advice to the Inland Revenue and to the Library of the House of Commons.
In my top left-hand pocket I always keep a little card, the same size as a credit card and encapsulated in plastic. It shows the rates of taxation and is issued by Peat Marwick McLintock. If that company is kind enough to send it to me, I think that I should admit its origin. It also states the national insurance contributions for the year, the VAT rates and exemption rates, the rates for corporation tax, for capital gains tax and for inheritance tax and the rates of taxation for company cars. I am sure that the hon. Gentleman will admit that those rates increased dramatically in the last Budget.
There is not one word of advice on that card apart from the truth. However, that is exactly the type of "wicked" document which according to the hon. Gentleman pays pounds into the hands of the super-rich and which would have to be filed in the Library of the House of Commons because it is an item which is "issued generally". And yet not one word of specific advice does the hon. Gentleman want to be placed in the Library or sent to the Inland Revenue.

Dr. Marek: rose—

Mr. Hanley: I shall give way for the last time because I must be brief.

Dr. Marek: I am grateful to the hon. Gentleman for giving way but he must get his facts right. What about a person with a company car which happens to be a Rolls-Royce? Under the Budget changes, instead of paying £5·26 a week for the privilege, he will pay £6·01 per week. That is hardly a huge change.

Mr. Hanley: The hon. Gentleman is trying to wriggle out of his embarrassment because I am exposing the truth about the new clause. However, he failed to mention the substantive point that I am making. What he would have filed in the Library of the House of Commons and with the Inland Revenue are items of a general nature that are circulated to the clients of tax advisers, not specific advice. If, as he says those general items are issued in the normal course of business, probably 5,000, 10,000 or perhaps even 20,000 such documents are being circulated. It would not cost a firm of chartered accountants a jot or tittle extra to send an extra two to the Inland Revenue and the Library. That is not a reason for saying,
Do not vote against the new clause.
Instead, it is an argument for saying that it would not have the effect that the hon. Gentleman believes that it will have of cutting that "immoral industry" like a scythe.
My last point refers to something that the hon. Gentleman did not say about the new clause, perhaps because he has not yet read it. It states that tax advisers must be registered. Whom is the hon. Gentleman serving? If one registers a person calling himself a tax adviser, that person might have no qualifications whatsoever but might then gain credibility from being on the register, as it might be seen as a mark of competence. Plenty of people call themselves tax advisers but are totally unqualified and


should not be on any register. The general public. should look at the professional qualifications of those who give tax advice.
The register would give those who are unqualified a status that they do not deserve. Those who are listed under section 389 of the Companies Act 1985 or by the Institute of Taxation are properly qualified in tax advice although others may be properly competent. To insist on registration would dupe thousands of people who would read the names on the register as if they were in "Yellow Pages" and turn to those people because the hon. Gentleman will have given them some credibility. The new clause is absolute nonsense. It will not have the effects that the hon. Member for Wrexham claims and it will have disastrous effects on the ordinary man in the street who should look to proper qualifications and not a mere registration.

Mr. D. N. Campbell-Savours: New clause 10 is important in so far as it is about professionalism and transparency. I consider that it would have some effect on accountants who are often imprisoned behind duties of confidentiality to their employers about how they might operate.
I want to draw attention to the imprisonment of accountants. By imprisonment, I do not mean imprisonment in prisons, but imprisonment within that duty of confidentiality. Subsection (3) of the new clause states:
The Regulations shall include the requirement to file with the Inland Revenue and the Library of the House of Commons any literature, brochure, advertisement or other communication of a general nature issued in the course of the conduct of such business.
In so far as it deals with communications, in certain conditions it must include communications from accountants and other organisations within those organisations to their employers.
I wish to draw the attention of the House to a particular communication. I intend neither to state to whom the communication was addressed nor to identify from whom it was sent, but I can say that the document is marked "Private and Confidential". I read it to the House as an example of the problems that exist and which were dealt with by the particular correspondent.

Mr. Hanley: This was not issued generally.

Mr. Campbell-Savours: Actually, it was. It was generally issued in so far as it was made available to me and to others at a later stage. It states:
Dear Mr. X, I understand that you will not be available at our meeting this afternoon. Since it was a fortnight since our last abortive meeting, I feel I must write to you on certain matters whilst there are a number of items outstanding, that is to say, VAT on racehorses, prospectus preparation and computerisation of accounts, the subject that concerns me the most has tax implications.
Some of these practices have been discussed briefly at meetings between ourselves and Mr. Y, and refer to the following: the practice of paying round sum expense allowances that are fixed and have no relation to expenses incurred, and the practice of paying expenses to part-timers in lieu of pay to avoid the wages of the same exceeding national insurance contribution thresholds".
This document is witnessed by a representative of the legal profession. A further letter states:
I thought I had substantially covered points raised in my memo.
The date is given, but I shall not reveal it.
However, to reiterate, I have sent to you a draft memo dealing with the matter of expenses. I have provided details of

those persons whose salaries are deemed to be paid by separate group companies. Further, I have indicated those whose workload is spread over different group companies, my advice was that wages and salaries should be aggregated for national insurance purposes.
My advice on expenses in lieu of wages, the granting of non-repayable loans and the granting of tax free bonuses was that they be abolished. The only item on which I had to comment was the matter of introducing stand-by allowances in respect of weekend working. I have to advise you that these would be subject to tax.
At our last meeting on the subject some two weeks ago, I asked that in case you did not agree with my advice and that of my colleagues you refer the matter to a suitable firm of accountants i.e. Deloittes for their judgment.

Mr. Hanley: Will the hon. Gentleman give way?

Mr. Campbell-Savours: No. I have no intention of giving way. The letter continues:
The practice of yourself withdrawing money and having it debited to travel expenses, whilst I appreciate it is against proper business expense, the Inland Revenue may infer differently.
The practice of having emoluments of certain personnel spread over different companies to avoid national insurance contributions, in spite of the fact that they have only one implied contract of employment, and the practice of paying tax free bonuses, and the practice of granting loans and the cancellation therefore without action as to the tax implication. One of the worrying features is the general talk in the office on this matter. Further I believe other people in accounts, and indeed, my predecessors, may have advised you on these matters. You said you would be seeing them within the next"—
the period—is identified in the letter.
Have you had the chance to see them? If not, perhaps I could see them with you. Perhaps it might be helpful if I explain why I have pursued this matter for nearly six weeks. Firstly, you proposed to go public. Whilst you and I might disagree about the time scale, I think it common ground that the necessary investigative accountants will turn over every stone in the organisation. They will, after all, not he responsible to the company but to the public who subscribe for shares. In my opinion, if they encounter a history of tax evasion, they will at least wish to raise provisions against outstanding liabilities. Secondly, the Inland Revenue have stepped up their emphasis on PAYE audit. The likelihood of such an audit of company Y has been increased by the recent television exposure on the Z affair.
9.15 pm
I am not prepared to identify that tonight.
It is my opinion that in that eventuality the Inland Revenue would have a field day in the face of such blatant and naive tax evasion. The point here is that faced with such a history, it would be far preferable to be legitimate rather than still carrying on in the same vein. This is the point"—
the person to whom the letter is sent is then identified—
I worry about most. We will not, as I have said before, serve your interest best by adapting the existing system or trying to invent other dubious schemes. We must abolish the practices. To do otherwise might prove extremely costly. Thirdly, and lastly, you must appreciate my position. I am a chartered accountant and as such have certain responsibilities. Bluntly, I cannot and will not be party to any illegalities. Whilst in your employment it is my duty to you and to my profession to seek and pursue a return to legitimacy. Time has elapsed since our first conversation and I feel I must respectfully ask you at your earliest convenience for your agreement and proposals to remedy the situation.
Any person who attaches a name to the sender or recipient of that letter may find himself the subject of a legal action. I advise people to be most careful in doing so. I draw this letter to the House's attention because I feel that correspondence of this nature should be brought before Parliament. It is in the public interest that we assess the implications of correspondence of that nature in so far


as we have here what is believed to be a reputable company, allegedly, in the view of an accountant, involved in practices that infringe standards that the Inland Revenue and society as a whole expect.
The new clause moved by my hon. Friend the Member for Wrexham (Dr. Marek) would deal with matters of that nature. That correspondence might have found itself in the hands of the Inland Revenue at a stage earlier than it subsequently did.

Ms. Joyce Quin: I would like to say a few words in support of the new clause and the issues raised by my hon. Friends. The new clause contains a useful measure and it is one that the Government could easily incorporate into the Bill. It would ensure that those giving advice in taxation matters did so in a responsible way and were not engaged merely in encouraging different forms of tax evasion and tax avoidance.
The hon. Member for Richmond and Barnes (Mr. Hanley) said it was not wrong to give advice. That is true, but the new clause, if accepted, would show us whether particular forms of tax break were being over-encouraged or over-used and would also allow the Government to work out whether the literature sent out was of an acceptable standard.
The hon. Member for Richmond and Barnes mentioned the forestry tax break. If the new clause had been in effect in previous years, the misuse of that forestry tax break would have been spotted much earlier. We would have been able to see how widespread was the advice given to people to go into forestry, thereby ruining large tracts of the countryside, and corrective action would have been taken much earlier.

Mr. Hanley: The Opposition must admit that many chartered accountants send copies of the information that they have issued generally to their clients to the Inland Revenue in support of their advice and of the applications and claims that their clients are making to the Revenue. Accountants are not at all secretive about the advice that they give generally. I disagree with the hon. Member for Gateshead, East (Ms. Quin) and her hon. Friends about the new clause because not a single word in the letter that the hon. Member for Workington (Mr. Campbell-Savours) has just read out would be placed in the Library of the House under the terms of the new clause, as the information in it was not issued generally. It was a specific letter and would not be required by the new clause to be lodged in the Library or with the Revenue.

Ms. Quin: I still believe that the new clause would be an extremely useful step. We do not say that it would cure everything, but the hon. Gentleman should consider it along with the other amendments tabled by the Opposition in Committee which, unfortunately, were not accepted by the Government. The Opposition tabled a range of amendments to deal with the problem of tax avoidance. We proposed an obligation for auditors to report tax fraud and that Britain should combine with other countries in the international campaign against tax fraud. Unfortunately, the Government did not accept those amendments. The new clause should be considered as one of a series of measures and not in isolation, although it has to be discussed in isolation on Report.
My hon. Friend the Member for Wrexham (Dr. Marek) pointed out that the problem of tax avoidance has increased during the Government's term of office. That has been shown by the overall amount of money that has been estimated to have been lost to the Exchequer and also in the number of cases that have been brought forward. It is true that the Government have recognised that tax avoidance and tax evasion are problems, but they seem to think that they were problems brought about by high and, as they called them, punitive tax rates. That seems to suggest that top taxpayers are especially dishonest in their rush to engage in tax avoidance schemes, yet although taxes have come down the problem of tax avoidance has not decreased.
We believe strongly that better safeguards and measures are necessary to tackle the problems. If information were given to the Government, to Parliament and to the general public, as the clause proposes, we should be in a better position to decide what further measures were necessary and perhaps a code of practice or new rules might be introduced to deal with the problem more effectively. It is true that that might result in an increase in Inland Revenue staff, but we would welcome that because we believe that staffing levels are hopelessly inadequate to deal with large-scale tax avoidance and tax evasion.
Our proposal might help the Government's image. Their nine years in office and, in particular, the Budget have led them to be seen as friends of the very rich and of tax avoiders. Money saved as a spin-off from such measures would leave more money for the worthwhile social purposes on which the Government have been so reluctant to spend money.
The Government have been generous, indeed wildly over-generous, to the richest, but they certainly have a duty to see that those taxes which are still imposed are properly and duly paid.

Ms. Hilary Armstrong: I support new clause 10, not because it would solve all the problems, but because it would signal to the country that the Government took tax avoidance as seriously as over-claiming benefit at the other end of the scale.
The Government frequently complain that we allege that they do not seem to care about people on benefit. I would make those arguments elsewhere. We can say that with such fervour and it is agreed with such fervour because of the great difference in their language and attitude towards people on benefit and those at the top who try to avoid paying tax.
It has often been said to me that in this debate Back Bench Members seem to refer to their parents. My father often used to say of these matters that so long as something is legal and one can get away with it, it is all right. I do not believe that. Some actions are legal but only because they are contrived to meet legal requirements. In every other sense they involve avoiding one's responsibility to meet commitments to the community by paying taxes which are due.
If an individual goes to his tax adviser and says, "I am not interested in avoiding tax; I wish to pay what I should pay and to ensure that my accounts are straight and that it is clear what I am doing," the adviser will reply, "You must be crazy. There are all sorts of ways in which I can push bits of money here and there so that you do not have to pay large sums in tax." My hon. Friend the Member for Wrexham (Dr. Marek) showed that it was still possible for


a millionaire to avoid paying any tax by allocating money for particular purposes. Yes, it is strictly legal, but is it right? I do not believe that anyone would want to defend that as right.
The new clause addresses the Government's responsibility to demonstrate their even-handedness and their concern to discourage tax avoidance as much as claiming benefit to which one is not entitled. The Government have a moral problem which is also a political problem. We are not encouraging people to go outside the law. We are saying that it is not right that the law should allow people to avoid their responsibility of contributing to the public purse when they can afford to.
I accept that the new clause may not have the exact effect that we seek. That is because there are tax avoidance experts in this country who will wangle their way around almost any device that the House tries to fashion. The tragedy is that they can advertise in weekly papers with no comeback from the Government. We do not hear the Government saying that it is disgraceful that such people advise individuals and companies on how to get around the letter of the law. No such condemnation is heard.
Acceptance of the new clause, or a commitment by the Government to reword it so that it meets the general point, would be a signal to those companies and individuals that the Government were not prepared to support such skirting around and abuse of the thrust of the law. The Government and, more importantly, the House, should say that. If we are interested in demonstrating that we believe in one nation with equal opportunities for all, without some people seeming to celebrate getting out of their public responsibilities, the House should send a clear message that it does not tolerate and will work against the sort of tax avoidance schemes of which we have heard such good examples this evening.
I hope the Government will think about this seriously. It is a moral and a political issue that is concerned with what is right—not what can be got away with.

Mr. Morgan: I want to make three brief points, one of which follows on from what my hon. Friend the Member for Durham, North-West (Ms. Armstrong) has said.
The new clause is not an attack on the chartered accountants' profession—anything but. It is a way of trying to ensure that income taxation, which the Government have thought of as a diminishing aspect of taxation—they much prefer value added and other expenditure taxes —should not be seen as a voluntary form of tax. It should be seen by everyone as a means of paying one's dues to society—paying for civilisation, for schools, playing fields and so on. Income tax cannot be voluntary; it must be part of the system in which everyone pays according to his need a proportion of his income, because that is how we finance public expenditure on defence, schools and other things.
In order for the tax not to be seen as a voluntary form of taxation that people can avoid paying, we must not create a society in which people start entertaining that sort of ambition. We must stop the notion that people are mugs to pay income tax. In the past nine years there has been an increasing emphasis on reducing income tax and top rates of tax, as though in some way they drove pop stars abroad and so were destructive of civilisation. The Government have started to create a climate in which taxation,

particularly of income, will increasingly be seen as part of the past, with no role to play in the future. And tax advisers play a vital role in that.
When we discussed this subject in Committee, we made great play of the fact that tax advisers and chartered accountants should be happy to remember not only that they are being paid by their clients in a proper manner, but that they have duties to their profession. They have their charter because they are expected to behave in accordance with it, in the same way as doctors and dentists, who hang their framed diplomas in the corners of their waiting rooms, provide a professional skill that has been tested by an appropriate body.
Not all taxation advisers, as the hon. Member for Richmond and Barnes (Mr. Hanley) said, are qualified, but they have certain obligations, to society as well as to their clients, to ensure that there is fair play between the former and the latter, who do not want to pay more tax than they are due for but who should be advised on methods of paying less than their due. Therefore, we opted for a registration scheme.
In Committee we suggested that, when a case went to court, the Inland Revenue and the courts should be able to look at the working papers. We do not ask for that when a case does not go to court, because we do not want any breach of confidentiality. There were howls of outrage from Conservative Members who worked for professional bodies. They said that that would be completely impossible. Professions such as accountancy have chartered bodies because they are expected to provide a minimum professional standard and because they are part of society, which has given them charters and the status that goes with them. A royal charter shows that a profession is not a cowboy outfit.
We ask for equality of treatment in the way that the Government approach the problems of unemployment and other benefit fraud and of tax fraud. During the Whitsun recess, a major television spectacular about the Department of Health and Social Security showed the sweep that it had organised to catch people making fraudulent benefit claims. We are not in favour of fraudulent benefit claims by people who are working, but do we ever see similar treatment of tax fraud? There is no parity between the way that the Inland Revenue goes about its work of minimising tax evasion and the way that the DHSS officers catch people on building sites. Until there is parity, this will be a divided society. One solution would be the registration of taxation advisers, so that they can both work with the Inland Revenue, as watchdogs on professional clients, and insist that their clients pay their dues to society. Taxation advisers are not there simply to help clients avoid paying their dues to society.

Mr. Henderson: I am grateful for the opportunity to say a few words on the new clause. I thought that I would be saying a few more words, but time does not allow.
The point I want to make emerged more than once in Committee and in the House. The Opposition have challenged capitalism before, and may do so again, but that is not what we are about this evening. We are asking for a bit of honest capitalism. We have already had a debate about full information being made available to ordinary people looking for credit. We are asking here for full information to be made available to potential investors, so that they know where their money is going and the risks that they will be taking. Full information


must also be made available to society so that it knows where the Government are providing incentives for investments. We hope that that will be in the interest of all of us. It is really about honesty.
That is borne out by enterprise zones. Those who take a keen interest in the City—I know that some Conservative Members are probably away from the House preparing for their activities in the City tomorrow rather than being with us this evening—will know about the developments in loan finance. Industrialists and corporate organisations no longer rely on direct finance from clearing banks. It is far more usual for them to go to some third or fourth stage removed financial intermediary, which is ultimately laundering money, much of which probably emanated from clearing banks. It is right that people who are giving funds to organisations or who are borrowing from them should know what is happening. That is why the organisations should be registered.
In relation to enterprise zones, I wonder how many people know about the Laser 1988 Trust which services clients of Johnson Fry. No doubt it is a reputable organisation, but most people would not know whether it was reputable or not because it is probably not registered. There have been many reports on enterprise zones. I am sure that the Government are disturbed at the cost of providing a job in an enterprise zone compared with the cost of other measures under section 7 expenditure.
If we want to see sufficient public expenditure, we know that tax subsidies for property investments in enterprise zones are a bad way of using public money and a high cost means of providing jobs. If companies like Laser 1988 Trust which are involved in attracting funds for this purpose had been registered, it might have emerged sooner than seven years after the establishment of enterprise zones that they were not the best way of developing areas that need to be developed or of creating jobs.
Not only investors but everyone would have known that these companies were offering 100 per cent. first-year tax allowances, large investments in London docklands in retail, office and restaurant developments, with a 25-year guarantee of income, regardless of the subletting position, and exciting potential for capital growth. A financial article says:
Colegrave Johnson Fry Ltd consider that this is the most important opportunity that has been created in tax shelter for many years.
Had that company been registered and had the information about it been made public, we would all have known that it is about tax avoidance schemes and tax shelter and has nothing much to do with the creation of jobs. With the proliferation of such companies, many of which are subsidiaries of investment trusts, we have a new development in the financial world. If we believe in honest and open capitalism, with the maximum information available to the participants, there is a need for new clause 10, which insists on the registration of companies which want to get involved in this business.

Mr. Norman Lamont: There is nothing like the subject of tax avoidance to make the Opposition look more cheerful. We have had subdued debates, with Opposition Members in a subdued mood, but suddenly the smiles have reappeared as we have devoted nearly a full hour to the subject of tax avoidance. The hon. Member for Wrexham

(Dr. Marek) has been able to return to the subject of the super-rich. He has as big a romance with them as Scott Fitzgerald did, but he takes a less benign view of them. However, it enabled him to read from a book, suitably yellow, published 20 years ago, telling people how to avoid tax under the Labour Government who were then in office.
The new clause, if it is to be taken seriously, would serve little purpose. Opposition Members may have wanted simply to air the issue of tax avoidance, which I agree is a serious matter. I want to remind the House of some of the things which we have done to counter tax avoidance. I do not believe that the new clause would achieve anything. The idea that the registration of tax advisers would help the Revenue is wrong. Unfortunately, the Revenue spends much of its time answering telephone calls from tax advisers and knows exactly who they are. We have had to curtail some of the interchange between tax advisers and the Revenue precisely because it is not proper for the Revenue to be involved in discussions such as have taken place in the past, which have amounted virtually to clearance. There is no difficulty for the Revenue in knowing who tax advisers are.
The hon. Member for Cardiff, West (Mr. Morgan) is right to say that sometimes working papers can shed light on particular problems. He will recall that we have taken some new powers under the Keith committee proposals. In general, the problem is not the hidden nature of the devices used for tax avoidance. After all, unless people intend to behave illegally, they have to make a tax return and show precisely the device that they have used to minimise their tax liability.
9.45 pm
One must distinguish between avoidance, evasion and something in between, which some people call "avoision". Evasion is very much a matter for investigation and prosecution. Avoidance is, of course, legal. It involves exploiting reliefs passed by the House and it is a matter for the House to debate whether it wishes, for example, reliefs on forestry to continue. That will not be helped by registering tax advisers. Then there is the grey area of "avoision". That is a matter of balancing whether reliefs should remain available as a matter of Government policy and deciding whether some schemes are artificial. That sometimes means that the Inland Revenue has to take cases to court. We have had some notable victories. A recent case probably saved about £1 billion of revenue. That is a much more fruitful way of approaching the problem.
I cannot believe that Opposition Members think that the new clause serves any purpose. The Revenue has no difficulty in obtaining knowledge of those people who give tax advice and of their activities. Revenue officials have to deal with those people every day in correspondence over individuals' and companies' tax affairs. The proposals would also be a significant resource cost for the Revenue and would not add to its knowledge of the work involved. There is no difficulty for the Revenue in discovering such information.
The hon. Member for Workington (Mr. Campbell-Savours) read out a letter, which I shall study, although it would not be appropriate to comment on it here. If the hon. Gentleman believes that the law is being broken, he will no doubt reveal the names of the people involved in the matters discussed in the letter, and we shall certainly consider those. However, I am certain that the


new clause would not catch the sort of activities—if that is a suitable word—described in that letter. The clause does not require people to deposit in this House or forward to the Inland Revenue working documents or letters to clients. It is a matter of general promotional literature, and that would not be covered by the clause.
I am a little surprised at the attitude taken by Opposition Members. Surely they do not believe that it is necessary to make tax advisers register with the Government to discover that the business expansion scheme, enterprise zones or forestry are being used to reduce tax liability. After all, that has been the Government's policy. The Government have deliberately passed those reliefs because they believe that they serve a purpose.
The hon. Member for Wrexham said that he does not approve of the business expansion scheme. I am sorry to hear that. A couple of years ago, the expansion of the scheme was welcomed by the Leader of the Opposition. It has contributed very much to finance for smaller businesses and has raised additional finance that would not otherwise have been raised.
Furthermore, in this Finance Bill we have targeted the business expansion scheme more specifically on smaller companies. But it is an example of a specific relief being used for a social purpose which we think is in the national interest. We do not need a register of tax advisers to tell us that some people are doing what we have given them a tax incentive to do.

Mr. Battle: Does the Minister agree that the difference in this Budget is that the business expansion scheme has been introduced into the housing market at precisely the time when the Housing Bill has been discussed in Committee without any reference to that fact at all? The Housing Bill seems to make life a lot easier for landlords to exploit tenants as result of the business expansion scheme at public expense and with a tax subsidy.

Mr. Lamont: We shall no doubt be debating the pros and cons of the business expansion scheme tomorrow. However, we do not need a register of financial advisers to discover that the business expansion scheme exists, because we have set it up in the House of Commons.
I note what Opposition Members have said about enterprise zones. They do not like them. The hon. Member for Dunfermline, East (Mr. Brown) has made his dislike clear. Without giving away any secrets of some of his colleagues, I can say that that is in sharp contrast to the views of some Opposition Members—they are not all present—who write and ask for enterprise zones to be established in their constituencies because they think that they serve a purpose. They know that employment has more than doubled in areas where enterprise zones have been established.

Mr. Campbell-Savours: The reason why some Opposition Members pressed for enterprise zones is simple. It is that we wanted the rate relief. The tax concession was never relevant.

Mr. Lamont: I did not know that the hon. Gentleman was one of those who pressed for an enterprise zone—I was not accusing him—but now we know.
If Opposition Members do not like these reliefs, it must be their policy to abolish them. I assume that they will abolish the business expansion scheme and enterprise

zones, which have done some good for some derelict and rundown areas. I also assume from what the hon. Member for Wrexham said about the disaggregation of husband's and wife's incomes, which he seems to regard as avoidance of tax, that they are opposed to that and that the Labour party will end what we propose on disaggregation.
I agree with the hon. Member for Durham, North-West (Ms. Armstrong) that tax avoidance should be taken seriously. If she and other hon. Members had been fair, they would have recognised that the Government have done many things. We have implemented step by step the findings of the Keith committee and given the Inland Revenue greater powers to inquire into the circumstances of individual taxpayers. Moreover, the yield from Inland Revenue investigations has gone up sevenfold while the Government have been in office. The hon. Lady referred to us not putting enough resources into investigations, but she should compare what we have done with what the previous Labour Government did. Over 3,200 people are now carrying out investigations in the Inland Revenue, compared with 1,600 under the previous Labour Government. That is a considerable increase in resources and it has also been responsible for the increased yield.

Mr. Morgan: Does the Minister agree that, despite the increased staff that have been put to work on this matter, and despite the expectations that were announced to the House when successive cuts in top rate tax were made that there would no longer be any incentive for tax evasion, tax evasion has been very much on the increase during the past nine years?

Mr. Lamont: That is pure assertion and the hon. Gentleman has provided no evidence for it. The fact that we have put more civil servants to work and may raise more revenue through their investigations is evidence of nothing except that the investigation has been successful and that this is productive work.
Opposition Members have also ignored the Government's action in successive Budgets to block loopholes. In this Finance Bill we have aligned the rates of capital gains tax and income tax. We have ended the forestry loophole, which they criticised today but did nothing about when they were in office. In previous Budgets we introduced legislation against bond washing and offshore funds. In recent weeks, as new evidence has come to light on matters such as restrictive covenants, and people being paid in gilts, we have announced immediate action against those abuses
I believe that we have shown through our actions to block loopholes and through the resources that we have devoted to investigations in the Revenue that we take the business of countering tax avoidance very seriously. However, the amendment would do nothing to strengthen the Revenue in this area.

Dr. Marek: We have had a very good debate and I thank all my hon. Friends on the Back Benches for taking part and making a valuable contribution in bringing home to the House and the country the indignation that we feel about the Finance Bill resulting from the Budget and the way in which the money has been divided.
I also thank the hon. Member for Richmond and Barnes (Mr. Hanley). He declared his interest. I can reassure him that we have never said that reputable advisers are doing anything dishonest. If the hon. Gentleman reads the Official Report tomorrow morning,


he will be reassured on that count. My hon. Friend the Member for Workington (Mr. Campbell-Savours) gave an example of a qualified adviser who had integrity and said so in the letter to which my hon. Friend referred.
I cannot go along with the Financial Secretary to the Treasury in placing all my trust in fighting cases in the courts hoping to recover money which has not been paid in tax, and hoping to win a few cases here and there. The Government should have watertight legislation to make avoidance impossible. It is not right that the Government should go to the courts for that purpose.
These matters are being considered afresh and no doubt the country's top minds are at work generating new tax avoidance schemes. Therefore, I am not claiming that the Government should not go to the courts on occasions, but they must consider alternatives and see what they can do to make the system as simple as possible. They must decide what is genuinely avoidable and what ought not be avoidable. Our argument with the Government is that we believe that they draw the line too far to one side of the argument.
We do not quarrel with the business expansion scheme or enterprise zones. However, we quarrel with their targeting. We do not believe that enterprise zones do the job that they were intended to do. The Department of the Environment has decided not to designate any more enterprise zones. Why is that? It can only be because they do not do the job. Many firms outside the zones have moved into the zones and the net effect is that they are used as a tax bolthole. We object to that.
The business expansion schemes are not being extended except in the property area. Why is that? I suggest that the Financial Secretary to the Treasury is somewhat too complacent in his views about tax evasion. Tax evasion has increased sevenfold over the past seven or eight years and tax avoidance schemes, tax boltholes and tax loopholes are running riot throughout the country. The Government have even said that there should not be more enterprise zones, but the Financial Secretary defended the system tonight. We cannot agree with that.
The new clause is small and will not change everything overnight. Nevertheless, communicating and imparting information can only help. For that reason, I commend the new clause to the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 197, Noes 252.

Division No. 412]
[9.59 pm


AYES


Abbott, Ms Diane
Boateng, Paul


Adams, Allen (Paisley N)
Boyes, Roland


Allen, Graham
Bradley, Keith


Anderson, Donald
Bray, Dr Jeremy


Archer, Rt Hon Peter
Brown, Gordon (D'mline E)


Armstrong, Hilary
Brown, Nicholas (Newcastle E)


Ashley, Rt Hon Jack
Brown, Ron (Edinburgh Leith)


Banks, Tony (Newham NW)
Buchan, Norman


Barnes, Harry (Derbyshire NE)
Caborn, Richard


Barron, Kevin
Callaghan, Jim


Battle, John
Campbell, Menzies (Fife NE)


Beckett, Margaret
Campbell, Ron (Blyth Valley)


Bell, Stuart
Campbell-Savours, D. N.


Benn, Rt Hon Tony
Canavan, Dennis


Bennett, A. F. (D'nt'n &amp; R'dish)
Carlile, Alex (Mont'g)


Bermingham, Gerald
Clark, Dr David (S Shields)


Bidwell, Sydney
Clarke, Tom (Monklands W)





Clay, Bob
McAllion, John


Clelland, David
McAvoy, Thomas


Clwyd, Mrs Ann
McCartney, Ian


Coleman, Donald
Macdonald, Calum A.


Cook, Frank (Stockton N)
McKay, Allen (Barnsley West)


Cook, Robin (Livingston)
McKelvey, William


Corbett, Robin
McLeish, Henry


Corbyn, Jeremy
McNamara, Kevin


Cox, Tom
McTaggart, Bob


Cryer, Bob
McWilliam, John


Cummings, John
Madden, Max


Cunliffe, Lawrence
Mahon, Mrs Alice


Dalyell, Tam
Marek, Dr John


Darling, Alistair
Marshall, Jim (Leicester S)


Davies, Ron (Caerphilly)
Martin, Michael J. (Springburn)


Davis, Terry (B'ham Hodge H'l)
Martlew, Eric


Dixon, Don
Maxton, John


Dobson, Frank
Meacher, Michael


Doran, Frank
Meale, Alan


Duffy, A. E. P.
Michie, Bill (Sheffield Heeley)


Dunnachie, Jimmy
Millan, Rt Hon Bruce


Dunwoody, Hon Mrs Gwyneth
Mitchell, Austin (G't Grimsby)


Eadie, Alexander
Morgan, Rhodri


Eastham, Ken
Morley, Elliott


Evans, John (St Helens N)
Morris, Rt Hon A. (W'shawe)


Ewing, Harry (Falkirk E)
Morris, Rt Hon J. (Aberavon)


Ewing, Mrs Margaret (Moray)
Mowlam, Marjorie


Fatchett, Derek
Mullin, Chris


Field, Frank (Birkenhead)
Murphy, Paul


Fields, Terry (L'pool B G'n)
Nellist, Dave


Flannery, Martin
Oakes, Rt Hon Gordon


Flynn, Paul
O'Brien, William


Foot, Rt Hon Michael
O'Neill, Martin


Foster, Derek
Orme, Rt Hon Stanley


Fyfe, Maria
Parry, Robert


Galbraith, Sam
Patchett, Terry


Garrett, John (Norwich South)
Pike, Peter L.


Garrett, Ted (Wallsend)
Powell, Ray (Ogmore)


Godman, Dr Norman A.
Primarolo, Dawn


Gordon, Mildred
Quin, Ms Joyce


Gould, Bryan
Radice, Giles


Graham, Thomas
Rees, Rt Hon Merlyn


Grant, Bernie (Tottenham)
Reid, Dr John


Griffiths, Nigel (Edinburgh S)
Richardson, Jo


Griffiths, Win (Bridgend)
Robertson, George


Grocott, Bruce
Robinson, Geoffrey


Hardy, Peter
Rogers, Allan


Harman, Ms Harriet
Rooker, Jeff


Haynes, Frank
Ross, Ernie (Dundee W)


Healey, Rt Hon Denis
Rowlands, Ted


Heffer, Eric S.
Ruddock, Joan


Henderson, Doug
Salmond, Alex


Hinchliffe, David
Sedgemore, Brian


Hogg, N. (C'nauld &amp; Kilsyth)
Sheerman, Barry


Holland, Stuart
Sheldon, Rt Hon Robert


Home Robertson, John
Shore, Rt Hon Peter


Hood, Jimmy
Short, Clare


Howarth, George (Knowsley N)
Skinner, Dennis


Howell, Rt Hon D. (S'heath)
Smith, Andrew (Oxford E)


Howells, Geraint
Smith, C. (Isl'ton &amp; F'bury)


Hughes, John (Coventry NE)
Snape, Peter


Hughes, Roy (Newport E)
Steinberg, Gerry


Hughes, Sean (Knowsley S)
Stott, Roger


Illsley, Eric
Strang, Gavin


Ingram, Adam
Taylor, Matthew (Truro)


Janner, Greville
Thompson, Jack (Wansbeck)


John, Brynmor
Turner, Dennis


Jones, Ieuan (Ynys Môn)
Vaz, Keith


Jones, Martyn (Clwyd S W)
Wall, Pat


Kaufman, Rt Hon Gerald
Wallace, James


Kirkwood, Archy
Walley, Joan


Lambie, David
Wardell, Gareth (Gower)


Leadbitter, Ted
Wareing, Robert N.


Leighton, Ron
Welsh, Andrew (Angus E)


Lewis, Terry
Welsh, Michael (Doncaster N)


Litherland, Robert
Wigley, Dafydd


Livsey, Richard
Williams, Rt Hon Alan


Lloyd, Tony (Stretford)
Williams, Alan W. (Carm'then)


Lofthouse, Geoffrey
Wilson, Brian


Loyden, Eddie
Winnick, David






Wise, Mrs Audrey
Tellers for the Ayes:


Worthington, Tony
Mrs. Llin Golding and Mr. Alun Michael.


Wray, Jimmy





NOES


Aitken, Jonathan
Fenner, Dame Peggy


Alexander, Richard
Fookes, Miss Janet


Alison, Rt Hon Michael
Forman, Nigel


Allason, Rupert
Forsyth, Michael (Stirling)


Amess, David
Forth, Eric


Amos, Alan
Fox, Sir Marcus


Arbuthnot, James
Franks, Cecil


Arnold, Jacques (Gravesham)
Freeman, Roger


Ashby, David
French, Douglas


Atkins, Robert
Gale, Roger


Atkinson, David
Garel-Jones, Tristan


Baker, Nicholas (Dorset N)
Gill, Christopher


Banks, Robert (Harrogate)
Glyn, Dr Alan


Batiste, Spencer
Goodhart, Sir Philip


Beaumont-Dark, Anthony
Goodson-Wickes, Dr Charles


Bellingham, Henry
Gow, Ian


Bendall, Vivian
Gower, Sir Raymond


Bennett, Nicholas (Pembroke)
Grant, Sir Anthony (CambsSW)


Benyon, W.
Greenway, Harry (Ealing N)


Biffen, Rt Hon John
Greenway, John (Ryedale)


Biggs-Davison, Sir John
Gregory, Conal


Blackburn, Dr John G.
Griffiths, Sir Eldon (Bury St E')


Blaker, Rt Hon Sir Peter
Griffiths, Peter (Portsmouth N)


Body, Sir Richard
Grist, Ian


Bonsor, Sir Nicholas
Ground, Patrick


Boscawen, Hon Robert
Grylls, Michael


Bowden, A (Brighton K'pto'n)
Gummer, Rt Hon John Selwyn


Bowden, Gerald (Dulwich)
Hanley, Jeremy


Bowis, John
Hannam, John


Boyson, Rt Hon Dr Sir Rhodes
Hargreaves, A. (B'ham H'll Gr')


Braine, Rt Hon Sir Bernard
Hargreaves, Ken (Hyndburn)


Brandon-Bravo, Martin
Harris, David


Brazier, Julian
Haselhurst, Alan


Bright, Graham
Hayhoe, Rt Hon Sir Barney


Brooke, Rt Hon Peter
Heathcoat-Amory, David


Brown, Michael (Brigg &amp; Cl't's)
Heseltine, Rt Hon Michael


Browne, John (Winchester)
Hicks, Mrs Maureen (Wolv' NE)


Buchanan-Smith, Rt Hon Alick
Hicks, Robert (Cornwall SE)


Buck, Sir Antony
Higgins, Rt Hon Terence L.


Burns, Simon
Hill, James


Burt, Alistair
Hogg, Hon Douglas (Gr'th'm)


Butcher, John
Holt, Richard


Butler, Chris
Hordern, Sir Peter


Butterfill, John
Howell, Rt Hon David (G'dford)


Carlisle, John, (Luton N)
Hughes, Robert G. (Harrow W)


Carlisle, Kenneth (Lincoln)
Hunt, David (Wirral W)


Carttiss, Michael
Hunter, Andrew


Cash, William
Hurd, Rt Hon Douglas


Chapman, Sydney
Irvine, Michael


Clark, Dr Michael (Rochford)
Irving, Charles


Clark, Sir W. (Croydon S)
Jack, Michael


Colvin, Michael
Janman, Tim


Conway, Derek
Johnson Smith, Sir Geoffrey


Coombs, Anthony (Wyre F'rest)
Jones, Gwilym (Cardiff N)


Coombs, Simon (Swindon)
Jones, Robert B (Herts W)


Cope, Rt Hon John
Jopling, Rt Hon Michael


Couchman, James
Kellett-Bowman, Dame Elaine


Cran, James
Key, Robert


Currie, Mrs Edwina
Kilfedder, James


Curry, David
Knapman, Roger


Davies, Q. (Stamf'd &amp; Spald'g)
Knight, Dame Jill (Edgbaston)


Davis, David (Boothferry)
Knox, David


Day, Stephen
Lamont, Rt Hon Norman


Dickens, Geoffrey
Lawrence, Ivan


Dorrell, Stephen
Lawson, Rt Hon Nigel


Douglas-Hamilton, Lord James
Lennox-Boyd, Hon Mark


Dover, Den
Lester, Jim (Broxtowe)


Dunn, Bob
Lilley, Peter


Durant, Tony
Lloyd, Peter (Fareham)


Dykes, Hugh
Lord, Michael


Evans, David (Welwyn Hatf'd)
Maclean, David


Evennett, David
McLoughlin, Patrick


Farr, Sir John
Major, Rt Hon John


Favell, Tony
Maude, Hon Francis





Maxwell-Hyslop, Robin
Speed, Keith


Meyer, Sir Anthony
Speller, Tony


Mills, Iain
Squire, Robin


Miscampbell, Norman
Stanbrook, Ivor


Moate, Roger
Stanley, Rt Hon John


Monro, Sir Hector
Steen, Anthony


Morrison, Sir Charles
Stern, Michael


Moss, Malcolm
Stevens, Lewis


Neale, Gerrard
Stewart, Allan (Eastwood)


Needham, Richard
Stewart, Andy (Sherwood)


Nelson, Anthony
Stokes, Sir John


Neubert, Michael
Stradling Thomas, Sir John


Nicholls, Patrick
Sumberg, David


Nicholson, David (Taunton)
Summerson, Hugo


Nicholson, Emma (Devon West)
Taylor, John M (Solihull)


Oppenheim, Phillip
Taylor, Teddy (S'end E)


Page, Richard
Tebbit, Rt Hon Norman


Paice, James
Temple-Morris, Peter


Patnick, Irvine
Thompson, Patrick (Norwich N)


Patten, John (Oxford W)
Thorne, Neil


Pawsey, James
Thornton, Malcolm


Peacock, Mrs Elizabeth
Thurnham, Peter


Porter, David (Waveney)
Townsend, Cyril D. (B'heath)


Portillo, Michael
Tracey, Richard


Powell, William (Corby)
Trippier, David


Price, Sir David
Trotter, Neville


Raffan, Keith
Twinn, Dr Ian


Raison, Rt Hon Timothy
Waddington, Rt Hon David


Rathbone, Tim
Wakeham, Rt Hon John


Redwood, John
Waldegrave, Hon William


Rhodes James, Robert
Walden, George


Riddick, Graham
Walker, Bill (T'side North)


Ridsdale, Sir Julian
Waller, Gary


Roberts, Wyn (Conwy)
Walters, Sir Dennis


Roe, Mrs Marion
Ward, John


Rost, Peter
Wardle, Charles (Bexhill)


Rowe, Andrew
Watts, John


Rumbold, Mrs Angela
Wells, Bowen


Ryder, Richard
Wheeler, John


Sackville, Hon Tom
Whitney, Ray


Sainsbury, Hon Tim
Widdecombe, Ann


Sayeed, Jonathan
Wiggin, Jerry


Shaw, David (Dover)
Wilkinson, John


Shaw, Sir Giles (Pudsey)
Wilshire, David


Shaw, Sir Michael (Scarb')
Winterton, Mrs Ann


Shelton, William (Streatham)
Winterton, Nicholas


Shephard, Mrs G. (Norfolk SW)
Wood, Timothy


Shepherd, Colin (Hereford)
Woodcock, Mike


Shepherd, Richard (Aldridge)
Yeo, Tim


Shersby, Michael
Young, Sir George (Acton)


Skeet, Sir Trevor



Smith, Sir Dudley (Warwick)
Tellers for the Noes:


Smith, Tim (Beaconsfield)
Mr. David Lightbown and Mr. Alan Howarth.


Soames, Hon Nicholas

Question accordingly negatived.

New clause 15

TAX EXEMPTION FOR SPORTS ASSOCIATIONS

(1) Where—
(a) an Association which has as its object the encouragement, development and governance of any sport or other form of recreational activity (or which has as its object the representation of such Associations) is approved for the purposes of this section by the Charity Commissioners for England and Wales, and
(b) the memorandum of association or other similar instrument regulating the functions of the Association precludes the direct or indirect payment or transfer to any of its members of any of its income or property by way of dividend, gift, divisions, bonus or otherwise howsoever by way of profit, there shall, on a claim in that behalf to the Board, be allowed in the case of the Association—
(i) exemption from tax in respect of income, and
(iii) exemption from tax in respect of chargeable gains.

(2) In Sections 338 and 339 of the Income and Corporation Taxes Act 1988, "qualifying donation" shall include a payment under a disposition or covenant made by a company in favour of an Association approved for the purposes of this Section under sub-section (1) above.

(3) The conditions specified in paragraph (b) as sub-section (i) above shall not be deemed not to be complied with in the case of any Association by reason only that the memorandum or other similar instrument regulating its functions does not prevent the payment to its members of reasonable remuneration for goods or facilities supplied, or for services rendered, of reasonable interest for money lent, or of reasonable rent for any premises.

(4) In this section "recreational activity" means any activities in the fields of physical recreation conducive to the health or welfare to those participating in them.'.—[Sir Eldon Griffiths.]

Brought up, and read the First time.

Sir Eldon Griffiths: I beg to move, That the clause be read a Second time.
Let me start with a few figures. First, the British people each year spend £4·5 billion on sport and sport-related activities, which is rather more than they spend on gas, electricity or bread. Secondly, the Government are fortunate to be able to take out of that sporting expenditure a revenue of £2·2 billion—£770 million in VAT and excise charges, £540 million in betting duty, £950 million in income tax and £100 million in corporation tax. Thirdly, of the total tax take, we return to sport approximately one fifth, £425 million, in rate support to local authorities for their sporting activities and £60 million—a pretty miserable £60 million—for the activities of the Sports Council.
I have two other figures which I am sure that my right hon. Friend the Financial Secretary is panting to hear. The first is that in this country sport employs directly, as salaried people, 367,000 of our fellow citizens, and another 690,000 working one way or another as voluntary helpers, as coaches, referees and administrators. They do that work for nothing: for the love of the game and to help young people.
Those facts demonstrate that the Treasury—God bless it—gets far more out of sport than is given back to sport. I make no complaint about that any more than I do about the fact that road and petrol taxes are not fully paid back in terms of road expenditure. There is a responsibility on all of us to contribute to the general revenue.
10.15 pm
Tonight, I am trying to change the proportions just a little. Consequently, my new clause is designed to even up the balance. Its purpose is to leave to voluntary sports organisations more of the money that they collect—many of them in tin cups, in 10p and 20p pieces—to allow them to save more of the subscriptions from their members and to use that money for what, in effect, are close to charitable causes.
The language of the new clause has been framed carefully to exclude from the tax relief that I am seeking any organisation that is in sport to make a profit. I am in favour of profit, but I do not seek to give tax benefits to those who make a profit. I seek to exclude from that benefit all forms of professional sport, including, incidentally, the Football League, for which in present circumstances I would not lift a little finger.
To qualify for relief under the new clause, a voluntary sport body would need to meet two conditions. First, its object must be

the encouragement, development and governance of sport or…recreational activity".
Lest my hon. Friend imagines that in any way I am seeking to help those who regard virtually any form of indoor amusement as something to be tax-relieved, I emphasise that the definition of recreational activity in my new clause means that it must be physical and conducive to the health and welfare of those who take part in it.
The second test that would have to be met—[Interruption.]

Madam Deputy Speaker (Miss Betty Boothroyd): Order. I am sure that it would be advantageous to the hon. Gentleman who is moving his new clause if those who are carrying on conversations would do so quietly.

Sir Eldon Griffiths: I could not even hear myself, Madam Deputy Speaker.

Madam Deputy Speaker: I could not hear, either.

Sir Eldon Griffiths: I am obliged to you, Madam Deputy Speaker. I assure you that you were missing a very good speech.
The second test that would have to be met before the tax relief would be due is that such sporting bodies would need to have articles of association that preclude
the direct or indirect payment or transfer to any of its members of any of its income or property by way of dividend, gift, divisions, bonus or otherwise howsoever by way of profit".
That makes it clear to those hon. Members who can hear, or to those who want to hear, that only voluntary bodies could possibly benefit.
I turn briefly to the machinery by which eligibility for this tax relief would be determined. At first sporting bodies suggested to me that it should be determined by the Minister. I have been a Minister responsible for sport and I know that it has one of the smallest and perhaps least fortunate trade unions in the world. Therefore, I immediately concluded that on no account should the Minister for sport have anything to do with determining tax relief. Instead, I went for the well-tried route of the Charity Commissioners. I believe that they are perfectly capable of determining whether a sporting body is in every sense entitled to such tax relief because it meets the criteria set out in the new clause.
In conclusion, who are the people that would benefit? I have in my hand a list of hundreds of voluntary bodies throughout the country who give their time and effort for the benefit of sport and to help young people. The anglers, the badminton players, the indoor bowls players, the canoeists, the equestrians and all the rest add up to a very large number of our citizens who, in my judgment, are entitled not to be taxed on the subscriptions that they collect or the donations that are made to help them.
How would they use the tax relief, which I estimate would run to not more than £2 million or £3 million per year at the very best, although I hope that it would increase as donations from the corporate sector increase? They would use it to provide better facilities and better coaches, so that people would be able to enjoy sport and have more to do instead of hanging around on street corners. Their health would improve at the same time. The object is good, the machinery is sound and I believe that my right hon. Friend should look upon the new clause sympathetically.

Sir Hector Monro: I rise, briefly, warmly to support my hon. Friend the Member for Bury St.


Edmunds (Sir E Griffiths). He put the case extremely clearly and highlighted how important it is to help sport, because it generates within itself the new facilities and new opportunities that we are all so keen to encourage.
The effort to help sport has been going on for many years. In the 1960s, under a Labour Government, I started trying to produce legislation that would provide mandatory derating of sports grounds for amateur clubs. Ultimately, perhaps 20 years later, that has now come into being. It shows that, with persistence and enthusiasm, sport will win through.
I hope that my right hon. Friend realises that within the House there is tremendous support for sport, for amateur sports clubs and for all the volunteer work within it. I hope that he will look favourably upon the new clause.

Mr. Menzies Campbell: New clause 15 stands in the name of two former Ministers for sport. It has just been supported by yet another, and I understand that it will be supported from the Opposition Front Bench in due course.
Undoubtedly the new clause attracts all-party support. You, Madam Deputy Speaker, had the privilege, if I may so put it, of presiding over a wide-ranging debate on sport last night. You will recall that the right hon. Gentleman the Financial Secretary to the Treasury, who is to reply to the debate, made a fleeting appearance in the debate and, when the issue of tax concessions for sport was raised, felt it necessary for reasons which were never explained to us, to depart and go elsewhere. But that does not detract from the fact that the contribution which is made to sport in our country by voluntary sporting bodies is so substantial that, without it, sport in a form that we know and enjoy simply could not exist.
It seems to me quite unnecessary that voluntary sporting bodies, including, for example, the British Olympic Association, should be compelled to pay corporation tax. If such bodies were exempt, all the sporting bodies in the United Kingdom would put £3·5 million back into sport in Britain—a small amount for the Treasury but an amount that would have a disproportionately large effect on the activities of those bodies which are presently compelled to pay it.
The new clause has all-party support and I hope that the House will be able to support it because in Olympic year it would, above all, provide some justification for the remarks made last night by the Minister responsible for sport. I notice that he is not with us. He said that the Government value sport highly, put a proper premium upon it and are determined to do everything in their power to advance sport and the cause of sportsmen. If the new clause becomes law, it would be more than earnest of those intentions, it would be a reality. It would give a clear and unequivocal signal that sportsmen and women in the United Kingdom could look to the Government for support and assistance.
For those reasons, the House should be happy, indeed eager, to accept the new clause.

Mr. Richard Tracey: I do not wish to delay the House for more than a few moments because hon. Members wish to talk about short speeches. Perhaps I can set an example.
I wish to put on record the fact that I support my hon. Friend the Member for Bury St. Edmunds (Sir E. Griffiths) because of the case that has been put strongly for a number

of years by the British Olympic Association. I agree entirely with what was said by the hon. and learned Member for Fife, North-East (Mr. Campbell). He said that the British Olympic Association should receive all the support it can from the Government and from our country as a whole when our young athletes go to do their best in the various Olympic sports.
As we have been building up to the Olympics the athletes have been preparing themselves. Alongside them, with just as much effort, the members of the British Olympic Association have been raising much-needed funds to allow our athletes to go to the Olympic games. If my right hon. Friend the Financial Secretary will give us an assurance that the Government will look seriously at what is in the new clause, it will add our flame to the efforts of our athletes in Seoul.

Mr. Henderson: Those of us who have sat through the debates on the Finance (No. 2) Bill for the past two months have become accustomed to contributions from Conservative Members which start vehemently, but become more diluted as the debate moves on; by the time the debate reaches its conclusion, there is not very much left with which to proceed. I am disappointed to detect signs of that in this debate.
I support the new clause, and my right hon. Friend the Member for Birmingham, Small Heath (Mr. Howell) will also give support. However, I do not give my support without reservation and I shall enter a caveat. There is a need for better help for sport in our country. Some professional sport is doing reasonably well; some is not. We should all agree on that. Another point on which we should also agree is that some of our amateur sporting organisations, particularly in sport that attracts support from the poorer sections of our community, have had a difficult time in recent years. I am not making a party political point. We have failed properly to redevelop many of our inner-city areas and our peripheral housing areas. We all know the areas to which I am referring. They can be found in cities up and down Britain.
People who live in those communities and are keen on sport have had a difficult time in recent years because local authorities have had neither the capital nor revenue resources to develop and sustain the development of any assistance to sport, whether it be the involvement of a community worker in a sporting activity at local revenue level or a major capital investment in a new stadium. Because of the difficulties faced by local authorities—as a result of the policies imposed by central Government—those areas and the sports that develop in them have problems.
10.30 pm
Furthermore, because of higher unemployment in those areas, people have less money in their pockets to devote to their sport or to its promotion. My own athletics club, Elswick Harriers, is in the west side of Newcastle—an area of high unemployment and inner-city deprivation in need of assistance from local government, which cannot help it at the moment. Youngsters who depend on the promotion and encouragement of sport are not getting proper opportunities. If part of the £3 million that would be given back to sport if the Government accepted the new clause found its way into areas such as mine, some good would accrue.
I must say that I do not think that I could do very much if I had £3 million to spend on sport. Much larger sums are needed to revitalise our sporting world. In many senses, it would be better to give sporting organisations direct funding rather than tax relief but realistically I know that that is not going to happen, and if we cannot have direct funding, I am prepared to settle for tax relief as a second best.
Let me enter my caveat, although I think that the new clause probably accommodates my wishes in this regard. It is not sufficient to say that an organisation will benefit from what is effectively charitable status under the new clause provided that it is a non-profit-making body. That is not a sufficient test. The House of Commons football team could set itself up as an unincorporated organisation whose objects were to give encouragement to football and its promotion and governance in the Palace of Westminster. If the interest from any of its investments appeared in its accounts it might then be entitled to tax relief. The House of Commons football team would be a creditable non-profit-making organisation, but essentially it would be a self-help organisation.
To qualify for the tax relief, an organisation ought to be more than a self-help, non-profit-making organisation. It ought genuinely to act to promote and govern sport in the widest sense and especially to help those who do not have the opportunity to take part in sport at the moment. That would be doing a service—whether to sport in its narrow definition or to recreation generally.
I hope that the Government will recognise the extent of support for the new clause. I urge those who tabled the new clause to proceed with it; I hope that they will listen to what we are saying in that regard. If they do that, the Government will perhaps agree to give about £3 million back to sporting organisations.

Mr. Denis Howell: It is nice to speak from the Opposition Front Bench and to record complete unanimity among all those who have spoken. Unlike my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) I hope that we shall not proceed to a Division. In reality, what we need is for Ministers to promise us an effective review of the principles that we have raised. We know that we could not carry the new clause, but it is important that we should sustain the unanimity that we have achieved.
There is every reason for trying to encourage sport and recreation. Wherever we look—in our schools and our cities, in town and country—we see growing social problems. In that context the endeavour of thousands of people in voluntary sport is beyond price and should be encouraged. That is a great social justification for new clause 15. I appreciate the hon. Member for Bury St. Edmunds (Sir E. Griffiths) tabling it and I support it.
Although I understand what my hon. Friend the Member for Newcastle upon Tyne, North was saying about the need to give grants where appropriate, that is not always the best way. I ask him to reflect on the situation facing the British Olympic Association in 1980. Without going into all the reasons for the difficulties, had we been given grants during the Moscow Olympics, the association would have been in great difficulties because the Government decided to withdraw support. It is better

to give permanent assistance, as the new clause suggests, because in a sense that removes the party political problems of the moment.
We should remember Edinburgh's difficulties with the great cost of staging the Commonwealth games, which Sheffield now faces in staging the world student games. It is important to give practical help and every encouragement to such cities which are willing to do that on behalf of the country. Birmingham and Manchester are others.
The hon. Member for Bury St. Edmunds has drawn the new clause tightly, for reasons that he explained. I hope that that will encourage the Minister to appreciate that all of us who are determined to encourage voluntary and amateur sport do so responsibly. With this all-party agreement on the record, that should produce a constructive response from the Government.
I remind the House that last time anything like this clause came before the House it was thanks to my hon. Friend the Member for Linlithgow (Mr. Dalyell) who has persistently and consistently raised these matters. He urged the Government to give help in this direction and the Chancellor of the Exchequer, then the Financial Secretary—I wish his successor on the Front Bench the same success—replied:
I accept that there is a problem. Indeed, this was accepted right at the beginning of the introduction of corporation tax. The Select Committee on Corporation Tax recognised that there was a problem and that some way of alleviating it should be sought. But there is a serious difficulty of definition.
That was during debates on the Finance (No. 2) Bill in 1980. The Government have had eight years to look at the definition and it is time that they came up with something, however limited, which all of us would support, to encourage amateur sport.
The then Financial Secretary continued:
It is not for the Treasury to define a charity. Still less is it for the Treasury to decide whether a debate should be held on the Goodman report."—[Official Report, 3 June 1980; Vol. 985, c. 1286–87.]
The House will remember that that report paid attention to charities. I have always believed that the Government were one and indivisible. It is for the Government, if not the Treasury, to produce an acceptable definition. I am sure that that is the wish of the House, and, on behalf of the Opposition, I offer our support to the new clause.

Mr. Norman Lamont: Having wandered by mistake into last night's debate on sport, and therefore having heard several speeches tonight that were made last night, I recognise the degree of interest in and feeling about this subject.
I have noted the comments of my hon. Friend the Member for Bury St. Edmunds (Sir E. Griffiths). There are difficulties with the new clause, but I am prepared to review the issues raised in it and to meet hon. Members to discuss it.
All the problems associated with the new clause relate to drawing lines and definitions. Such things are always tedious to people who want their good causes to be advanced, but they are important to those of us who have to put our names to the Bill and the policies in it.
The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) illustrated the difficulty. He interpreted the new clause as applying to sports clubs. I do not think my hon. Friend the Member for Bury St. Edmunds intended that, but I fear that the clause would apply to clubs. That would have far-reaching consequences. It would be difficult to distinguish a club, as an


unincorporated association, from other sorts of unincorporated associations that perform worthwhile activities, such as housing associations that are not run specifically for charitable purposes, certain types of clubs, local enterprise agencies and parent-teacher associations. It would be difficult to exempt one of those without exempting the others. So I cannot go as far as the hon. Member for Newcastle upon Tyne, North wanted.
I want to say a word about how sporting bodies are taxed. Generally, clubs and associations are liable to corporation tax on income from investments—money in the bank—or from commercial activities such as business sponsorship schemes. That is right. There is a tax deduction for the company, so the money should be taxed in the hand of the recipient organisation. But I am informed that funds raised from members through subscriptions or donations are not generally taxable. That may interest hon. Members.
In general, it has been shown again and again—there have been a number of court cases—that the promotion of sport is not a charitable purpose. Special exemption for charities is not easily available. My hon. Friend's new clause addresses that point. It requires that the qualifying association should be approved by the Charity Commissioners. No doubt that was intended as a way of limiting the problems, but the task would be beyond the powers and experience of the Charity Commission, which is responsible for deciding whether a particular body was established for charitable purposes. The commissioners' decisions are based on charity law and on the principles that have evolved over numerous court cases. Although

my hon. Friend has specified the criteria he thinks should be used to determine whether a sporting body is a charity, the provisions of the new clause would not, by themselves, be sufficient for the Charity Commissioners. They would need further guidance. That is a major problem: charity law, which is based on case law, is extremely complicated.
I have just outlined a number of difficulties, but I recognise that there is keen interest in this subject. I shall review it, and I shall be happy to talk to hon. Members about it at their convenience.

Sir Eldon Griffiths: I am obliged to my right hon. Friend. I agree that there are problems in this matter that have baffled previous Governments. However, the time has now come—this has been demonstrated by the virtual unanimity in the House—for us to do better by our voluntary sporting organisations. It is very much in our interest to do so. I accept immediately my right hon. Friend's invitation to have a discussion about this matter, possibly with right hon. and hon. Members on both sides of the House who have had the quaint distinction of having been Ministers for sport. I hope that he will allow us to associate with such a discussion those representatives of the voluntary organisations who feel deeply about this matter.
I am grateful to my right hon. Friend, other of my hon. Friends and the right hon. Member for Birmingham, Small Heath (Mr. Howell) for their support.
I beg to ask leave to withdraw the new clause.

Motion and clause, by leave, withdrawn.

New clause 21

CLAUSE FOR BAD DEBT RELIEF

Brought up, and read the First time.

`In section 22 of the Value Added Taxes Act 1983 (which allows refunds of tax in cases of bad debts) there shall be added after subsection (1) a new subsection (1A) as follows:
(1A) In subsection 1 above and regulations under that subsection, references to a "person" shall include any person who has funded the payment of value added tax (the "Payer") on behalf of any person liable (the "Trader") to pay tax on a supply of goods or services; the Payer shall, subject only to subsection (5) below and to regulations under subsection (1), be entitled on making a claim for any bad debt relief to the Commissioners to a refund of tax chargeable by reference to the outstanding amount as if he has been the Trader and to the exclusion of the Trader".'.—[Sir William Clark.]

Sir William Clark: I beg to move, That the clause be read a Second time.
Someone importing goods into this country has a forwarding agent. In turn, the forwarding agent must pay the VAT on the value of the goods being imported. That is perfectly all right, provided that the goods come in, VAT is paid, and the importer eventually repays the forwarding agent the amount of VAT paid. However, if a forwarding agent pays the VAT and the importer goes into liquidation, the forwarding agent cannot reclaim the VAT.
As my hon. Friend will no doubt tell the House, where a forwarding agent has paid the VAT and the importer or his company goes into liquidation within 30 days, there is a concession whereby the Customs will repay the VAT paid to the forwarding agent.
For the Government to believe that an importer who goes into liquidation will get a bankruptcy or liquidation order against him within 30 days is pie in the sky. It is bound to take a forwarding agent three, four or five months before he can get an order of liquidation or receivership. Consequently, the Inland Revenue's concession of 30 days means nothing.
Where a forwarding agent has paid the VAT on behalf of an importer and the importer goes into liquidation, the Inland Revenue should repay to the forwarding agent the amount of VAT that he has paid on behalf of the importer. Perhaps my clause is not all that well worded, but the spirit of it is that in no circumstances should a forwarding agent be put in the position of paying VAT on behalf of the importer and then, if the importer goes into liquidation of losing that sum paid in VAT. It has nothing to do with the forwarding agent.
According to the VAT regulations it could be that the VAT paid by the forwarding agent could be paid under the registration of the forwarding agent. As I understand it, Customs and Excise do not accept this. There is an anomaly in our VAT regulations, and I hope that my hon. Friend will ensure that the forwarding agent is protected for the amount of money that he has paid on behalf of the importer who goes into liquidation.

Mr. Lilley: My hon. Friend has explained with admirable lucidity the circumstances in which forwarding agents operate, and how the law bears on them, so I will not repeat that explanation to the House and delay its proceedings. He rightly mentioned that, at the beginning of the month, we introduced an extra-statutory concession that goes some way to meet the problem that he has

highlighted. He takes issue with two aspects of that concession—the condition that Customs have imposed for returning VAT to the agent rather than to the importer, and the provision that the delay should be at most one month after the importer goes into liquidation or some similar state of insolvency.
The one-month condition is to ensure that the agent makes best effort to recover the debt, for which he is commercially responsible. It is not our intention that the agent should necessarily force the importer into liquidation. To avoid the position where the agent foresees liquidation and does not press his case, leaving Customs to pick up the bill, the agent generally bills the importer for import VAT for payment immediately or within a short time, such as seven days. He picks up his own and other charges over a longer time. Given the short time within which VAT is normally reimbursed, it is not unreasonable to set a one-month deadline, but I accept that, as my hon. Friend said, liquidation takes longer than a month to achieve. I undertake to look at the working of the time limit in the light of the experience that we have gained with the extra-statutory concession.
I have today announced a general review of bad debt provisions within the VAT system as a whole, not just as it affects importers. Within the context of that general review, we shall look closely at the aspects that my hon. Friend has raised. He has made a powerful case, and that will reinforce the intensity with which we examine the experience of this extra-statutory concession, and we may come round to his view in due course. I am grateful for the way that he has highlighted the issues at stake. We could not accept the new clause as it stands, but we would work within the context of extra-statutory concessions in the first instance.

Sir William Clark: I am grateful for my hon. Friend's assurance. However, I am worried about what happens if, while the Customs and Excise review is going on, a forwarding agent pays VAT for an importer who goes into liquidation. Could my hon. Friend give an assurance that, having accepted the spirit of the new clause—I shall not push it to a Division—from now on, if a forwarding agent has paid VAT on behalf of an importer, and that importer goes into liquidation while the review is going on, Customs and Excise will make repayment of the VAT retrospective from today?

Mr. Lilley: I shall certainly consider the point and write to my hon. Friend about it. I take the point he is making. We have spelt out the specific terms of the extra-statutory concession. Obviously I would not want to change them on the Floor of the House without considering further the point that he has made.

Sir William Clark: In view of that assurance, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 24

REGISTER OF DESIGNATED LAND

`. After subsection (5) of section 31 of the inheritance Tax Act 1984 there shall be inserted the following subsections—

"(6) The Treasury shall prepare, and keep up to date, a register of land designated under subsection 1(b) above.

(7) The register referred to in subsection (6) above shall, in relation to each area of land so designated, contain—
(a) a map on a scale of not less than 1:25,000 showing the boundaries of the land; and
(b) a copy of the undertakings given under subsection (2) above for the maintenance of the land and the preservation of its character, and for securing reasonable access to the public.

(8) The register referred to in subsection (6) above shall be made available for public inspection free of charge at all reasonable hours, and so much of the register shall likewise be made available—
(a) as relates to land in Northern Ireland, at a place in Northern Ireland;
(b) as relates to land in Scotland, at a place in Scotland; and
(c) as relates to land in Wales, at a place in Wales.".'.—[Dr. Marek.]

Brought up, and read the First time.

Dr. Marek: I beg to move, That the clause be read a Second time.
I think that the best thing for me to do is to read to the House a resolution which was adopted unanimously at the annual general meeting of the national council of the Ramblers' Association on 10 April 1988. The resolution is about inheritance tax and access and it will make the points for the new clause. It says:
This National Council of the Ramblers' Association remembers that for many years the public were denied unrestricted access to some of the most beautiful parts of the country such parts of the Devonshire Estate in Wharfedale in North Yorkshire including Simons Seat and Barden Moor and Barden Fell. In recollects with pleasure its success in gaining access to those and other areas by virtue of its campaigns. This National Council has noted with concern that although relief against Inheritance Tax has been granted to the owners of the Estate the Association has not been told of any additional access to the estate although Section 31 Inheritance Tax Act 1984 specifically states that the relief is to be granted upon the owner securing reasonable access to the public.
This Council therefore urges both Her Majesty's Government and the Devonshire Estate to make public details of the reasonable access that has been secured. In the event that no reasonable access has been secured (other than that which has been previously secured by Access Agreements or by permissive paths—for the former of which the public already pays and the latter of which can be withdrawn at any time) this Council urges that access be granted immediately.
Furthermore having noted that the Devonshire Estate is not the only landowner that has secured relief from Inheritance Tax it calls upon Her Majesty's Government to publish sufficient details of cases where relief has been granted to enable the public to know what reasonable access has thereby been secured.
There can be no conceivable reason for withholding from the public details of the extra access that has been secured for them in return for concessions under inheritance tax. Surely it must be right for the public to know—by a notice which is displayed or is available at tourist information offices—that there is access to such and such a place at such and such a time. I do not think that confidentiality can arise. Just because the tax details are negotiated between the Inland Revenue and the person who pays the tax, that does not mean that the public should not be told about the extra access. The spirit and meaning of the legislation is that the concession is made for the public. Therefore, the public are entitled to know so that they can make use of the concession. If the public cannot make use of the concession, why should it be made for inheritance tax?
The new clause seeks to make the information available. A noticeboard with times of access would be useful. The Government should provide details of the extra access. I hope that they will not try to justify not doing so because of confidentiality. I do not think they could sustain that argument. I shall be interested to hear what the Minister has to say.

Mr. Brooke: As the hon. Member for Wrexham (Dr. Marek) made clear, the clause seeks to establish a public register of outstanding land that has been the subject of heritage tax reliefs. The register would include details of the undertakings that the owner has given as a condition of receiving the reliefs.
One of the conditions of the reliefs is that there should be reasonable public access to the land. It is right that the public should know that they have that access, but the proposal would go further. It would tell the public why access has been granted—that is, for tax reasons—and that would be wrong.
I wish to deal now with the defence of the principle of Revenue confidentiality, which is important to all taxpayers, although the hon. Member for Wrexham was a little dismissive of it.

11 pm

Mr. Andrew F. Bennett: Will the Minister explain how people are supposed to know about access at present?

Mr. Brooke: If the hon. Gentleman wishes, I shall speak about publicity arrangements, but I wish first to enter the defence for confidentiality.
It is essential that we should guard against any creeping erosion of our right to keep our private affairs private. The publication of a register indentifying land subject to inheritance tax reliefs would be an unnecessary erosion of the privacy of the taxpayers concerned. The reason for the availability of the land is immaterial. What matters is that the land is there and that the nation has acquired rights to enjoy it and to ensure its proper maintenance. The proposed register would not help to increase those rights, and would involve an unwarranted and pointless breach of confidentiality.
That does not mean that we object to publicity about public access to heritage property. Indeed, requirements about publicity are built into the undertakings mentioned in the clause, but it is right that the publicity should take a form that does not reveal that the access is being given for tax reasons, unless the landlowner wishes to announce that.
Publicity about public access to heritage property which has been conditionally exempted from inheritance tax is incorporated in the terms of the management agreement. The agreement is negotiated to give effect to the undertakings about preservation and public access that are required as a precondition of exemption. Requirements will differ from case to case, but, outstanding chattels apart, for which different arrangements apply, those will normally comprise various proposals.
First, the owner should inform the British Tourist Authority, and the relevant bodies in other parts of the kingdom, of the opening arrangements and subsequent changes. Secondly, the owner should advertise the opening arrangements in one or more suitable publications with


national circulation. Thirdly, the owner should display a notice outside the property giving details of the opening arrangements. Fourthly, the owner should agree that the advisory body or bodies, or their agents, which confirmed the property's eligible quality and with whom the terms of the detailed management agreement will have been negotiated, can divulge the access arrangements to anyone who inquires about them. Finally, the owner should agree to such other publicity as the advisory body, or bodies, consider to be appropriate. That could include displaying a notice in some public place in the locality, such as the local post office, library, tourist office or town hall or in a local preservation society's newsletter.
The management agreement would also normally provide scope for additional measures to be agreed, if appropriate, between the owner and the advisory body or bodies at a later stage.

Dr. Marek: Herein lies the conundrum. I accept that tax affairs should be confidential between the Inland Revenue and the person concerned, but, as there is a concession for the public to have greater access, they should have no need to inquire about it. They should be told about it and the information should be publicly available. I should be interested to hear what the Minister says about that. If there is to be greater access, simply as a result of a concession in respect of heritage tax, I do not see how we can avoid saying that there will be greater public access because of inheritance tax. One can leave it at that; one does not need to give any more details.

Mr. Brooke: Let me respond to the hon. Gentleman's preliminary question about whether further publicity arrangements are contemplated.
The machinery for publicising public access is kept under review by the Inland Revenue, in conjuction with other interested Departments and the advisory agencies, with a view to the improvement of publicity without compromising tax confidentiality. The Inland Revenue and the Countryside Commission are considering an arrangement for the commission to respond to queries about public access in particular localities by including details of designated land with land to which public access is available for reasons other than tax exemptions so that a mixture of relevant land would be identified.
The hon. Members for Wrexham and for Denton and Reddish (Mr. Bennett) asked whether there was additional access in the event of there already being public access to the land. In many cases there may be reasonable access before inheritance tax exemption is claimed. I think that that was part of the resolution that the hon. Member for Wrexham read out. It is not a prerequisite that more access is always required in return for tax exemption, but the exemption can ensure with more certainty that existing access will be maintained and not reduced at the owner's whim without tax consequences. Therefore, by definition there is a greater assurance that access will be maintained.
The principle of confidentiality governs the Government's reaction to the new clause and I would encourage my hon. Friends to reject it.

Dr. Marek: What is the Government's position where, as a result of the concessions being made, there is an increase in access? Surely the only logical position is to say that the public need to know about that increase in access

and, if necessary, people can put together two and two to make four if inheritance tax has just been paid. That is not an intrusion into matters that should be confidential. Has the Paymaster General any view on that point?

Mr. Brooke: In a quite different area of Government activity, I have a responsibility for the forthcoming Government data network, where there is extreme sensitivity about confidential details. All I can say is that once the principle of tax confidentiality of individual taxpayers begins to be eroded, one is on a slippery slope.

Mr. Andrew F. Bennett: I am rather disappointed by the Minister's response. He does not seem to have grasped the problems that so often arise in areas of claimed greater access. Greater access is often not being conferred, but rather there is a reduction in access. In many instances there may have been a right of way or some other custom and practice use of the land; it is at the point that the tax deal is done, and that ceases to be a right of the tax arrangement.
Therefore, what was basically a statutory right, either a public right of way or an unregistered right of way that could have been claimed, is lost to the public. Unless the Government can demonstrate that the public will have a clear statement of what extra access they have, there is little way of judging whether the Inland Revenue or the public have been diddled by the landlord. Something that they had in the past will then be theirs only as a result of a tax concession.
In many areas, the Inland Revenue can simply look at the books and work out whether someone is paying the right amount of money. But it is a complicated and difficult business for someone from the Inland Revenue to check what has been the traditional access to an area, perhaps over the past 30 or 40 years. The only safeguard is to make public what extra access it is claimed is being given. If that is done, the people who usually use that land can turn round and say that that is no concession at all and that a tax concession is being made for no public benefit.
Unless that openness about the extra access takes place, it will be virtually impossible for the Revenue to enforce the matter fairly. In view of the problems that have occurred over access in recent years in many parts of the country where custom and practice access over many years have not been registered as public rights of way and have become permissive access which can be removed at any time, people should be very wary about what is happening. I am very disappointed that the Government are not prepared to go much further.
If the Government are considering ways in which the extra access can be publicised, I hope that they will ensure that the Ordnance Survey is informed of any new footpaths so that they may be shown on maps as rights of way or permissive rights. It should be automatic in the publicity provisions that the Ordnance Survey is notified so that the information appears on maps. The county council should also be notified so that the information may be incorporated on footpath maps and the councils can compare the details with footpath information that they have obtained when preparing definitive maps.

Mr. Brooke: My recollection is that the hon. Member for Denton and Reddish (Mr. Bennett) is, like me, a veteran of the Committee stage of the Wildlife and Countryside Act 1981. In that spirit, I will respond to his remarks.
There is a trade-off between the fact that the tax is to be given up and the public's acquisition of rights to a reasonable level of enjoyment of private land. The arrangements are negotiated by the Countryside Commission as advisers to the Revenue. They do not depend in any way on the amount of tax involved. They are either reasonable or they are not. It is for the Countryside Commission alone to ensure on behalf of the nation that the arrangements are reasonable.
The arrangements for monitoring undertakings have been reviewed recently and more systematic procedures have been devised to monitor the owner's performance in fulfilling the responsibilities set out in his undertaking. The undertaking now include a requirement to make an annual report. Where necessary, the Countryside Commission will arrange for a local government body to monitor the landowner's performance of his or her side of the agreement in terms of the maintenance of the land and of public access. There is a genuinely constructive effort on all sides to achieve the access to which hon. Members have rightly attached importance.

Dr. Marek: I thank the Paymaster General for responding to the interventions that have improved the communication between both sides of the House. We have had a better debate as a result. I am also grateful that steps are being taken to improve the position. However, I believe that the Paymaster General has got it wrong.
The Paymaster General's first duty is to the public. A tax concession is given to a particular estate on the condition that the public will have extra access or rights that they did not have before. Those rights must be made available to the public and they must be informed so that they know that those rights exist If someone wants to keep his tax affairs completely confidential that person or an estate does not have to apply for the tax concession. If he does apply for the concession it should be made clear that one of the effects will be not that the amount of money under consideration will be made known, as the Paymaster General has said, but that there will be extra rights which will be made known publicly.
The Government have got it wrong. The Opposition will not seek to divide the House, but we believe that the Government must do more. Perhaps the Government will have more discussions with the Countryside Commission and other bodies to discover whether a better system can be evolved in future.

Question put and negatived.

New clause 31

PAYMENT OF EXCISE DUTY ON SPIRITS AND WINES

`The Alcoholic Liquor Duties Act 1979 shall be amended by inserting, after section 74, the following section—

Payments of excise duty on spirits and wines.

74A.—(1) Any duty chargeable on spirits or wines pursuant to section 5, or section 54 above shall be paid, in any year commencing with the year which begins 1st April 1986, fifty-six days after the commencement of the relevant period.

(2) In subsection (1) above 'relevant period' means the period beginning with the date on which the spirits or wines are imported into the United Kingdom or removed from an excise warehouse (as the case may be) and ending on the date on which those spirits or wines are sold to a person otherwise than in the course of excise licence trade carried on by him.

(3) The powers of the Commissioners to make regulations under this Act or under any other

enactment shall be read and construed subject to, and in accordance with, this section".'—[Mr. Bowen Wells.]

Brought up, and read the First time.

Mr. Bowen Wells: I beg to move, That the clause be read a Second time.
I declare an interest as notified to the House in the Register of Members' Interests.
This new clause is not unfamiliar to my colleagues on the Treasury Bench and their officials. Duty deferment has caused serious concern to the industry for many years. En opposition, the Conservative party promised to make right the inequitable situation when it returned to office. and it did so in 1979. True to their word, the Conservative Government introduced the Bill that became the Customs and Excise Management Act 1979. It gave Customs and Excise commissioners powers to make provision for deferred payment of excise duty subject to such conditions or requirements as may be imposed by the regulations or, where the regulations so provide, by the commissioners.
With such powers, one might consider that the new clause is unnecessary. However, it is about five years since the powers were exercised by the Government and the commissioners, when they gave a concession of 28 days of duty deferment. That went some way to offset unfairness and inequity.
The House will know that, in effect, an excise duty is a sales tax. Under the current regulations, those who keep bonds and must pay excise duty—that is, the sales tax that is payable by the eventual customer—actually pay the tax or excise duty direct to the Revenue 28 days after removal of goods from a bond. Before the regulations were introduced, it was payable prior to their removal from bond. Therefore, the Government have accepted the principles about which I am speaking.
On average, excise duties are recouped by bond holders about 12 weeks from the time the goods are removed from bond. The 28-day period does not in any way represent the cost that is incurred by bond holders as a result of the way in which the excise duty is collected at present. Bond holders are not only tax collectors for the Government but Government financiers, because they have to pay the necessary financial charges on the amount of money that is borrowed to pay the excise duty. That is a considerable cost to the industry.
The principle is accepted. In equity, the Government accept that they must meet the case. We suggest that we should halve the difference. That is to say, we should increase the period of deferment from four weeks to eight weeks. That still does not meet the 12-week period that must be financed, but I should have thought that it was a sensible compromise between the two figures. Of course, the cost of that suggestion is zero. It means, though, that, because of the deferment period, in the year in question, using its annual accounting methods, the Treasury must forgo part of the revenue. However, it is collected soon after in the following year. Revenue is forgone in one year.
There is an additional, familiar reason. It is becoming much more important for the Government to reconsider their decision on the matter. I refer to 1992, the advent of the single European market and, therefore, the harmonisation or, at least, the approximation of excise duties and their treatment throughout Europe.
In Belgium, spirits have a four-month duty deferment period. In Luxembourg the period is two to six months, in Denmark it is 45 days, in France two months, in West Germany three months and, of course, in our own country only one month. Therefore, to move to two months, as the clause suggests, would simply put us on the same level as that of France, and in considerably worse condition compared with West Germany and other wine and spirit producers. I urge my hon. Friends to look at the matter again to see how they can meet this serious objection from those dealing with bonds and wines and spirits in this country.

Mr. Nicholas Brown: Along with my hon. Friends who served with me on the Committee, I am utterly sick of amendments and new clauses of this kind. We had a bellyful in Committee. [HON. MEMBERS: "A skinful."] We would have preferred a skinful, but it was a bellyful that we were given.
The hon. Member for Hertford and Stortford (Mr. Wells) has very properly declared his interest, and I am pleased that he did so. I assume that that interest is his position as parliamentary consultant to International Distillers and Vintners Export Ltd. He also declared a consultancy with Geest Industries Ltd., and with the Hawley Group—which I believe is Michael Ashcroft's group of companies. The hon. Gentleman will correct me if I am wrong. When he used the word "we" in moving the new clause, he presumably meant he and International Distillers and Vintners Export Ltd. He may have meant himself and his hon. Friends, but no other names feature on the amendment paper.
If this were an isolated instance, it would be wrong for me to make too much of it. But it is not an isolated instance; it is the latest of a series of such submissions that have been made both here and in Committee. I hope that I will be allowed to set out a little of the background, and explain why we are so annoyed. Before I do so, however, let me say that I shall be asking the Committee of Privileges, on behalf of the Opposition, to draw up new and tighter rules for the declaration of business interests for Finance Bill Committee members and others who wish to make amendments to the Bill. This is not a direct complaint to the hon. Member for Hertford and Stortford. It is perhaps his misfortune that this is the point at which I have chosen to make a much broader complaint on behalf of the Opposition.
This is what we have had to put up with. On clause 13, amendments Nos. 30, 60, 61, 50, 51, 53, 41 and 42 were tabled by the hon. Member for Bournemouth, West (Mr. Butterfill). The purpose of each was to extend the period in which small businesses must register for VAT: it was a way of easing VAT regulations. On clause 15, the hon. Gentleman tabled amendment No. 11. The purpose of the clause was to put civil penalties on VAT claims. The purpose of the amendment was to give Customs and Excise officers the right to mitigate the penalty—a concession to those who were supposed to make payment of such a penalty.
On clause 48, the hon. Member for Cannock and Burntwood (Mr. Howarth) aimed to extend the exemption of non-assessability for tax to the entertainment expenses of directors and higher-paid employees—a straightforward concession to what I think my hon. Friend the

Member for Wrexham (Dr. Marek) would call the super-rich. On clause 51, the hon. Member for Dover (Mr. Shaw) sought through amendment No. 246 to change the timing of the relief on business expansion scheme moneys subscribed to approved investment funds, the aim being to ease the restrictions on BES funds.
On schedule 6, the hon. Member for Daventry (Mr. Boswell) tabled amendment No. 248, whose purpose was to extend the transitional relief on woodlands associated with farming—a concession sought, I understand, by the Country Landowners Association, which had lobbied forcefully for it. On clause 104, the hon. Member for Basingstoke (Mr. Hunter), through amendment No. 344, sought to extend rollover relief to all business assets used in trade. To give the Financial Secretary his due, he said that the amendment could lead to considerable avoidance, and he was certainly right about that. The amendment sought to allow any business asset to extended deferred capital gains tax liability. It would have given rise to considerable tax avoidance opportunities.
When the Committee came to consider schedule 8, amendment No. 353 was moved by the hon. Member for Basingstoke. The schedule was an anti-avoidance measure, which had some support from my right hon. and hon. Friends. The amendment was an attempt to frustrate the closure of a tax loophole. Its purpose was to create a more complex and more effective new tax loophole.

Mr. Michael Colvin: Will the hon. Gentleman give way?

Mr. Brown: I shall accept interventions when I have completed this part of my speech.
When the Committee reached clause 109, amendment No. 227 was moved by the hon. Member for Bournemouth, West. The amendment sought to ease the regulations on investment trusts, which are vehicles used by the wealthy.
I move on to new clause 13, which was tabled by hon. Members who were not members of the Committee, the hon. Members for Shipley (Sir M. Fox) and for Croydon, South (Sir W. Clark). The purpose of the new clause was to remove the ceiling on tax relief for benefits in kind. The argument against the proposition was that it would be the thin end of the wedge for tax relief on private medical insurance, and that is exactly what was intended.

Mr. John Butterfill: Will the hon. Gentleman give way?

Mr. Brown: I shall do so at the end of my considerable list.
I move on to new clause 15—

Mr. Butterfill: Will the hon. Gentleman give way?

Mr. Brown: No.
New clause 15 was moved by the hon. Member for Bournemouth, West and supported by the hon. Member for Wyre Forest (Mr. Coombs). The clause would have extended the time for which a company may set off tax profits against tax losses from the preceding year. That is currently the procedure for the two preceding years. In another words, another tax concession was being sought.
New clause 35 was withdrawn at the insistence of the Opposition—

Mr.Butterfill: rose—

Mr. Brown: I shall not give way to Conservative Members while I read out the list. I shall give way to them once I have finished reading it. Surely that is fair.
New clause 35 was withdrawn under duress. It had been tabled by the hon. Members for Wanstead and Woodford, (Mr. Arbuthnot), for Daventry and for Basingstoke. It was a recipe for tax avoidance. It would have exempted gifts or bequests of woodlands from inheritance tax.
Subsection (7) to new clause 28 was moved by the hon. Members for Wyre Forest, for Fulham (Mr. Carrington) and for Maidstone (Miss Widdecombe). The purpose of the clause was to give tax relief to companies on moneys used to buy back their own shares to put in a trust to assist employees. The subsection was designed to offer a major tax loophole.
New clause 37 was withdrawn by the hon. Member for Croydon, South. Its purpose was to make easier tax avoidance for a share option scheme by allowing those who have such schemes to sell every year instead of every three years.
New clause 43, which was withdrawn, was moved by the hon. Members for Wanstead and Woodford and for Daventry. Its purpose was to assist those involved in any close company regime. It would have given substantial financial benefit to small family businesses. New clauses 38 and 39, moved by the hon. Member for Basingstoke, would have provided extra inheritance tax relief for holdings of unquoted shares in companies. That is the list.
11.30 pm
It was our concern that companies, and not constituencies, were being represented at this stage of the Finance Bill, and that property, not people, was motivating the hon. Members who moved the new clauses. I make no specific complaint about any individual hon. Member, but that is an extraordinarily long list of vested interests that could not possibly belong to the majority of any of the hon. Members' constituents. They were special interests. The dividing line between a legitimate interest and a less legitimate interest is very fine and we shall be seeking a review of such matters through the Committee of Privileges. In particular we shall be seeking firm guidelines and adherence to them to prevent abuses.

Mr. Butterfill: The hon. Gentleman referred to two of the amendments that I tabled. The first related to investment trusts. The hon. Gentleman suggested, quite erroneously, that I was seeking a tax change in their favour. The amendments were seeking an expansion of the areas in which they might be permitted to invest. Therefore, his assertion is totally wrong and I hope that he will withdraw it.
His second point related to losses. I was seeking to give the same treatment to losses as was available to competitor manufacturers in other western European countries. The hon. Gentleman might have had some sympathy with that. In so far as it related to our international competitiveness it certainly received a great deal of sympathy from many of my constituents.
In discussing the tax changes for which I was asking, the hon. Gentleman significantly failed to mention the changes which I was seeking for the elderly. I seem to remember that the hon. Gentleman and his hon. Friends voted with me.

Mr. Brown: I studiously avoided mentioning the clause, which was much trailed and got the hon. Gentleman six

minutes on the Jimmy Young show, so it cannot have been of no significance. It also got him 35 minutes on the Finance Bill. The topic has aroused considerable interest around the country, and the hon. Gentleman had pursued it for a sustained period. Although some were willing to describe it as nothing but a ramp for Allied Dunbar, that was not the view of the parliamentary Opposition. However, some of the other matters the hon. Gentleman has raised would not fit so easily into that category.
I do not want to be drawn into arguing the merits of each of the clauses. Clearly that would be wrong. However, the parliamentary Opposition have had enough of Parliament and the Finance Bill being used as a vehicle for lobbyists rather than a vehicle for raising legitimate constituency interests.

Sir William Clark: rose—

Mr. Brown: I give way to the hon. Gentleman, but I am not nearly as sympathetic to him as I am to the hon. Member for Bournemouth, West.

Sir William Clark: I am most grateful to the hon. Gentleman for giving way. I am sure that he is not sympathetic to me, but he should get his facts right before he distorts them. He said that I tabled an amendment on share option schemes and then withdrew it. The amendment is still on the Order Paper. It was not selected. I have not withdrawn it, and I hope that the hon. Gentleman will withdraw the accusation that I have withdrawn the amendment that I tabled relating to share option schemes.

Mr. Brown: I apologise if I said that the amendment was withdrawn and it was not withdrawn. That is not the charge I was making. I was making the charge that it was tabled in the first place. I understand that I may have described new clauses as having been moved when they were proposed but not moved. From our point of view the difference is very fine. We oppose the use of the Finance Bill for raising interests that are not proper interests for Members of Parliament, but involve undue affection for commercial and business interests and not the interests of the constituents whom we were sent here to represent.

Sir William Clark: On a point of order, Madam Deputy Speaker. New clauses and amendments are tabled on the Order Paper and it is up to the Chair to make the selection of them. If the hon. Gentleman says that the fact that Conservative Members have tabled clauses which are not selected is a sort of lobby, is that not a reflection on the Chair's selection?

Madam Deputy Speaker: I do not regard that as a. reflection on the Chair's selection. It is a reflection not of the opinion of the Chair, but of the opinion of the hon. Members who table the amendments or new clauses.

Mr. Nicholas Brown: Further to that point of order, Madam Deputy Speaker. I wish to make it clear that I intend no reflection on the Chair, for which I have the greatest admiration.

Mr. Lilley: I do not intend to mix in that argument except to say that I have always assumed that hon. Members, speaking on behalf of whatever cause they choose, are speaking with honour and putting forward views because they believe them and wish to see them upheld. No doubt the hon. Member for Newcastle upon


Tyne, East (Mr. Brown) had his reasons for putting forward his list. Those reasons may reflect his interest in the success of his party. That is up to him, but I am sure that he spoke with honour, as all my hon. Friends have done.
My hon. Friend the Member for Hertford and Stortford (Mr. Wells) could have justified his moving of the new clause by his generous desire to share his enthusiasm for the beverages with which it deals. I can vouch for that because I have partaken of his hospitality on occasion. He said that the clause is a familiar one, and so it is. It is so familiar that is still retains the date of 1986 from the last time it appeared. That means that were it to be accepted as it stands it would be retroactive, which I do not think is intended.
I recognise that there is a long-standing concern about the matter among those in the wine and spirits business. I recognise too that the whisky industry plays a valuable part in the life of the country, particularly of Scotland, for the employment it provides and for the conviviality it provides here and abroad. It is rather sad that in standing up for the interests of the industry—that is how my hon. Friend the Member for Hertford and Stortford sees the new clause—which brings employment to many of the constituencies of Opposition Members, they did not thank him rather than criticise him.
I cannot accept my hon. Friend's case because he tries to say simultaneously that the deferment procedures we have at present are costly to the industry and that if we were to grant a longer deferment it would not be costly to the Government. The industry's gain in those circumstances would be the taxpayers' loss. The loss of cash flow in the first instance would be about £,245 million in a year, and if we were forced to extend the measure to beer and cider, as might be the case, it would involve a loss of £400 million of cash flow. The interest on that money would be an ongoing loss to the Treasury and should be taken into account.
The importance and contribution of the spirits industry in particular was recognised in the last three Budgets of my right hon. Friend the Chancellor when duties were not raised. In two of the three Budgets, duties were not raised for the wine section of the industry.
My hon. Friend the Member for Hertford and Stortford mentioned the approach of 1992 and the possibility of harmonisation of duties and commensurate arrangements proposed by the European Commission. As I have said, those proposals are no more than proposals. We are not alone in having great difficulty with them and I think it extremely unlikely that that package of measures or anything like it will come into force by 1992. There will therefore be no requirement for us to harmonise the related aspects of duty collection as my hon. Friend suggests.
In making comparisons with other countries, it is important to recognise that it is not just duty structures that differ; procedures and commercial practice differ so that in other countries, too, industries may be bearing the cost of tax collection for the same period, or for a longer or shorter period than ours. I hope that my hon. Friend will recognise that we understand the industry's worries about this matter, which my hon. Friend the Chancellor naturally considered fully before his Budget. If my hon.

Friend and those in this important industry for whom he speaks, wish to discuss the matter before the next Budget, we shall look forward to the customary representations.

Mr. Wells: It saddens me to hear the hon. Member for Newcastle upon Tyne, East (Mr. Brown) suggest that my motivation in tabling the new clause was in any way related to self-interest. It would be quite easy for me to avoid the implications of the list that the hon. Gentleman read to the House: one could cite a large number of hon. Members whose constituents are severely affected by the provisions. Many Opposition Members, especially those who represent Scotland, would agree that we need the equalisation of taxation across Europe to move so that the whisky industry—Scotland's primary industry and the biggest exporter from Scotland—is not at a disadvantage compared with producers and exporters of other spirits in Europe.
This is a very serious issue for the whole industry, of which Britain is a leader—and not only domestically. It owns large parts of the liquor and alcohol industries in the United States and parts of Europe. The new clause deals with a serious issue of equity and equalisation, which has serious constituency implications, for many hon. Members. A large number of those who work in the industry in Harlow, which is in the neigbouring constituency, none the less live in my constituency, so if I wanted to I could claim a constituency interest in the matter. The hon. Member for Newcastle upon Tyne, East gave a legitimacy to such an interest, and suggested that that was the only way in which we could raise matters of concern.
The hon. Gentleman can report it to the Privileges Committee if he wishes, but I am certain that my hon. Friends and I will be exonerated from the implications and the smears that he tried to put on us for taking a legitimate interest in a very serious matter affecting the employment of thousands, if not millions of people in this country, which has a very serious effect on our balance of trade and our exports.

Mr. Nicholas Brown: I am sorry that the hon. Gentleman should regard it as a smear when I read out his entry in the Register of Members' Interests.

Mr. Wells: I did not say that that was a smear. I referred to the implication of the hon. Gentleman's remarks. The outrage with which he read the list suggested that there was something dishonourable in taking up these matters even if one has a declared interest and has brought it to the attention of the House. If his dictum were accepted, none of us would be able to raise legitimate issues. Opposition Members would be in no position to raise in the House matters to do with trade unions or their interests. The House would be a great deal poorer if hon. Members could not bring their deep knowledge of particular interests to its attention.
I am sure that the House does not wish to be delayed further on this matter. I did not intend to prolong the debate. I thank my hon. Friend the Minister for answering my propositions sympathetically. The argument that we do not have to harmonise excise duties because of 1992 does not abort the argument that the spirits and wine industry should be able to trade on the same basis as that of its competitors overseas, particularly those within the EEC. Therefore, my argument has some serious validity


and I am grateful to him for saying that he will consider with deep seriousness the inequity involved. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 3

HYDROCARBON OIL

Mr. Colvin: I beg to move amendment No. 1, in page 2, line 31, at end insert—
`and at the end there shall be inserted "but there shall be no duty of excise on aviation gasoline fuel, as defined in section 11(2)(a) below",'.
The amendment would wholly abolish the excise duty on aviation gasoline, or avgas.
After all that has been said about hon. Members declaring their interests I must say that although on my curriculum vitae I am listed as a qualified pilot, as a Member of Parliament I have neither the time nor the money to maintain the validity of my licence; more's the pity. In reply to what the hon. Member for Newcastle upon Tyne, East (Mr. Brown) said about tax avoidance, the rate at which the Government are cutting rates of tax will soon mean that the tax avoidance business will be out of business. Perhaps next year his list will be a great deal shorter.
Avgas fuel is used in piston-engined aircraft and bears duty of 46·5p per gallon plus VAT, whereas aviation kerosene, which is used in the more expensive turbo-prop and jet engines and which is called avtur, carries no duty. The amendment would remove this gross injustice. We hoped that the Government would remove the injustice in 1982. On that occasion, having won the argument, we gained only a 50 per cent. reduction in the duty. This amendment gives the Government the opportunity to complete the welcome reform which they began then.
I have heard it said within the Treasury that avgas is mostly used for private and pleasure flying and avtur for business and commercial flying, so the so-called wealthy private pilots who can afford to fly for pleasure may just as well pay duty on that fuel. That is based on a false premise. If the Treasury still uses that argument, one must question the validity of any other reasons that it puts forward for resisting the amendment.
Any analysis will show that the vast majority of passengers flying commercial airlines do so for recreation and pleasure, not business, while most of the fuel used by general aviation, that is the smaller aircraft, is for business purposes. The breakdown of general aviation and flying shows that 63 per cent. is air taxi operators, corporate and third-level passenger operations, 25 per cent. is flying training for professional and private ratings, 10 per cent. is agricultural flying and aerial work, and just over 2 per cent. is pure sport and recreation.
The general aviation training role is particularly important. Between 1975 and 1986, little sponsored training for civil aviation took place in the United Kingdom because the airlines did not need the additional pilots. Now, with civil aviation booming, the airline industry is grabbing every available pilot and there is a serious shortage of air taxi pilots and flying instructors, which must be made up. Without the pool of private pilots to draw upon, I reckon that commercial civil aviation would probably collapse.
This demand is worldwide. Because of the extra burden of avgas duty and the resulting higher costs which our flying schools have to bear, the training of overseas pilots in Britain has almost stopped. That means a loss cif invisible earnings of about £25,000 per head, a total running into tens of millions of pounds of lost foreign revenue for Britain.
The Government suggested that if the duty on avgas was abolished the fuel would be used in motor cars. Not only would avgas with no duty still be up to 16p more expensive than ordinary motor fuel, but it would do the engines of motor cars no good. Because of its special chemical characteristics, it is not suitable for cars. In any case, the distribution of avgas is strictly controlled by a few organisations and it is delivered only to our 60 or so airfields. Also, because the amount of avgas used in proportion to motor fuel and avtur is tiny, its consumption can easily be monitored, it can be dyed like farm diesel and spot checks can be carried out on its use.
It is good that the Government are interested in saving administrative costs. The Customs and Excise are certainly no exception. A pilot flying an avgas-fuelled aircraft can claim back his duty paid before departing on an international flight. A lot of bureaucracy and red tape are involved in completing and verifying all the documents, counter-checking claims and issuing cheques for payments. Abolishing the duty will abolish all this cumbersome bureaucracy.
What would this cost? In a full tax year, the loss to the Revenue of completely abolishing avgas would amount to £2,500,000. To put that in perspective, it is the cost of half a mile of motorway.
To sum up, 95 per cent. of British general aviation aircraft are piston-engined and use avgas, which is heavily taxed. The other 5 per cent. are jet-engined or turbo-prop-powered and use avtur, which is tax-free. The jet and turbo-prop operators could be said to be the wealthier end of the general aviation market, yet their fuel is duty-free and their less wealthy competitors use fuel bearing 46p per gallon duty. That is illogical discrimination, and it is dotty. This highly entrepreneurial industry, mainly composed of small businesess and self-employed people—exactly the sort of people we are pledged to support—does not need the millstone of avgas duty around its neck.
I have a letter from Mr. Danny Forman who, as chief executive of the General Aviation Manufacturers and Traders Association, has done a great deal to help commercial and general aviation in the United Kingdom. He has placed an advertisement in the aviation trade publications. The heading says, "Spot the Difference". Beneath it are pictures of two aircraft that look identical. Both have a crew of two and carry eight passengers. Both are low-winged monoplanes. Both have twin engines, propellers and tricycle undercarriages. Both are used extensively for business transport to save the valuable time of executives working for the United Kingdom economy.
But the aircraft on the left has a propellor turbine engine using avtur fuel, thus paying no duty or VAT. The aircraft on the right, used for exactly the same purpose and looking identical, is a propellor piston-engined aircraft using avgas fuel and paying 46·5 per cent. per gallon duty —and probably 15 per cent. VAT on top of that. Most of


my hon. Friends feel that that is completely incomprehensible. My right hon. Friend the Chancellor has demonstrated that he can and does axe taxes—why not this one?

Mr. James Wallace: The hon. Member for Romsey and Waterside (Mr. Colvin) has advocated the case so well that little remains to be said. I rise only to lend support to his argument. I have received representations from the Orkney flying club, in my constituency, which made a compelling case for the abolition of this duty. It not only finds the difference between avgas and avtur anomalous, but it has pointed out that Loganair's islander planes which operate in my constituency are all piston-engined aircraft and the duty paid on the fuel will undoubtedly lead to increased transport costs for those who fly back and forth from the main island to the north isles of Orkney and Shetland. That constituency interest is important, because of the increase in transport costs.
The hon. Member for Romsey and Waterside said that a fear had been expressed that, if the duty were removed, avgas might be used in cars. I have received a letter from the Orkney flying club that says that the problem is perhaps the other way round. Its secretary said:
In private aviation many owners have turned to the use of car petrol in their aircraft. This saves considerably on costs, but since the control of quality on aviation fuel is very much stricter than that of car fuel, there must be a much higher risk of contamination and therefore a greater risk of accidents. All this for a very small return for the government.
I hope that the Minister will listen to the strong arguments made not only in this debate, but in other representations before the Budget. The return to the Government is relatively small and the removal of this anomaly or some concession would be welcomed even at this late stage.

Mr. Lilley: My hon. Friend the Member for Romsey and Waterside (Mr. Colvin) has fought a vigorous and capable campaign on this issue. The House is familiar with the arguments that he has presented so eloquently, supported by the hon. Member for Orkney and Shetland (Mr. Wallace).
The dilemma is that avtur bears no duty and my hon. Friend does not want to alter that; gasoline used by motor cars is heavily taxed; and the avgas which is used by the piston-engined planes to which he referred is usable in motor cars and could be diverted to them if it was economic to do that. To prevent abuse and the consequent loss of revenue, there is a good case for having a duty on avgas. Effectively, it either has to be aligned with motor cars and considered as gasoline—gasoline for motor cars is taxed, so why should it not be when used in piston engines?—or, as my hon. Friend said, they are both used in aeroplanes—as avtur is used in aeroplanes, and that is zero-rated, avgas should be too.
When my right hon. Friend the Foreign Secretary was Chancellor he entered into a judgment of Solomon. He decided simply to split the difference and halve the rate of duty on avgas. He emphasised that he saw that duty reduction not as a halfway shift towards complete abolition, but as a final compromise solution that took account of all the arguments of those in general aviation,

who balanced those against the revenue burdens placed on other forms of transport, including essential ground transport.
I am afraid that there is no justification for further relief of avgas. It is, of course, a high-lead petrol and many cars could run on it, or on a mixture of avgas and petrol. Suggestions have been made that this could be prevented by dyeing and other measures, but I do not think that any of them would be satisfactory in practice and could be out of order in relation to aviation standards.

Mr. Gerald Howarth: Avgas is already dyed, so there is no question of adding dye.

12 midnight

Mr. Lilley: The alternative would be to make it double-dyed. It would be difficult both to mark it in a way that is identifiable when it is in a vehicle tank and to stop cars and check whether their tanks contained an untaxed form of gasoline. We do not want to go down that avenue.
My right hon. Friend the Chancellor reviews all taxes when he makes his Budget judgment every year. I cannot suggest that this is other than a final compromise solution, although as I have said, I am always open to receive visits from my hon. Friend the Member for Romsey and Waterside should he wish to renew these arguments nearer the time.

Dr. Alan Glyn: Colouring in petrol was introduced for the services during the war, but it never had any practical effect.

Mr. Lilley: I am grateful to my hon. Friend, who has reinforced my argument. He provides practical evidence against the contribution of my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth). With that support, I rest my case.

Mr. Colvin: I have listened to my hon. Friend the Economic Secretary, and I do not think that he has understood the argument, because we have had a rerun of what has been said by him and other Treasury Ministers who have been sent letters by those who have been lobbying on behalf of general aviation over the past 12 months. However, as he has made it clear that my right hon. Friend the Chancellor and other Treasury Ministers are happy to review all taxes between now and the next Budget, and that he is prepared to see representatives of the general aviation industry before he makes up his mind, I am happy to leave it in the lap of the gods and trust that where I failed to persuade him to change the duty, they may succeed. On the basis of that understanding, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10

POWER TO SEARCH PERSONS

Dr. Marek: I beg to move amendment No. 80, in page 6, line 31, after 'but' insert—
`The officer shall not require the suspect to submit to a strip or intimate search without receiving an authorisation from a superior officer of the rank of senior executive or higher and'.

Mr. Deputy Speaker (Sir Paul Dean): With this it will be convenient to take the following amendments: No. 18, in page 6, line 34, at end insert—
'(2B) The officer informing the suspect of the effect of subsection (3) below when requiring him to submit to searches of his person, whether rub-down, strip or intimate shall take him before a justice of the peace or before a superior officer of a rank of senior executive or higher, or in the case of the suspect being required to submit to a rub-down search, to such a superior officer if he is not satisfied that the suspect is fully aware of the effect of subsection (3) below.'
No. 82, in page 6, line 34, at end, insert—
'(2A) The officer informing the suspect of the effect of subsection (3) below shall do so verbally and offer to do so in writing if the suspect so desires.'
No. 79, in page 6, line 37, at end, insert
`(of a senior executive rank or higher)'.
No. 83, in page 7, line 10, at end insert—
`(5A) The Commissioners shall formulate a code of practice under which any powers in this section shall be exercised.'

Dr. Marek: My right hon. and hon. Friends have tabled five amendments dealing with the Customs and Excise management of searching and detection of people who enter the country but do not abide by the laws on drugs and other proscribed materials. Amendment No. 83 is a comprehensive amendment. It deals with a code of practice, and covers many issues. Amendment No. 80 deals with the seniority of the officer who shall require a type of search to be undertaken. Amendments Nos. 81 and 82 are related in that they deal with a suspect being fully aware of his or her rights, and say that information on these rights should be made available not just verbally but in writing. At the least, the suspect should be told that the information is available if he or she desires to see it.
I hope that the debate will not be too long, as the night is getting on, but this is an important matter. The debate should not be party political as both sides of the House want an efficient procedure that is understood and respected by the public.
Customs officers have powers of search and detention. In many ways those powers exceed the powers of the police. When a policeman arrests a person, the arrest is covered by a code of practice. At present there is no code of practice for customs officers. Even though the suspect is not arrested, customs officers have powers of detention. I hope that I will get a careful reply from the Economic Secretary. It should be stated somewhere that customs officers will only use their powers reasonably and that any detention should be reasonable pertaining to the circumstances. If a code of practice is established, it should define what it would be reasonably necessary for a customs officer to do in pursuance of his duty.

Mr. Andrew F. Bennett: Can my hon. Friend explain why it is necessary to establish a new code of practice for customs officers rather than simply to apply the code of practice which exists under the Police and Criminal Evidence Act 1984? Having established after a great deal of parliamentary debate a code of practice for one group of people to carry out searches, why should we want a different code of practice for Customs and Excise officers? I fear that the Government's view is that there should not be any code of practice. If we want the public to know their rights, it would be much better to have one code of practice for all searches.

Dr. Marek: Home Office code C would probably do very well for customs officers. On the other hand, the

powers are slightly different. Customs officers have a power of detention which is not a power of arrest. The Economic Secretary may say that there will have to be changes in the code of practice to accommodate the slightly different position. My hon. Friend the Member for Denton and Reddish (Mr. Bennett) may want to make a short contribution later to amplify the point.
When a suspect is detained, his or her rights should be imparted to the suspect verbally or by written notice. If a suspect is required to undergo an intimate or strip search, the suspect should have the right to go to a justice of the peace or a senior officer. In the case of a rubdown search, the suspect would have the right to go to a senior officer if he or she so wished.
Many suspects speak English well, and nearly all of them are accommodating; there are no problems because they realise that customs officers have a difficult job to do. I am concerned about the one case in 10,000 where a problem might arise. Human beings are human beings and we are all imperfect in one way or another. Misunderstandings can arise. In those circumstances, there should be clarification of the procedures so that the public can have confidence in customs officers. I urge the Economic Secretary to ensure that written notice is available to a suspect.
The written notice could be not just in English. Many people entering this country do not speak English, so it would have to be in a sufficient number of languages. We can never get that absolutely right. Some people are illiterate. We cannot take account of cases where people cannot read and do not speak English but speak a language that no official at the port of entry speaks. I do not ask for 100 per cent. cover in every eventuality, but we can go a long way towards that. Although we go some way towards that at present, it would be a great advantage if a written notice of rights, in various languages, were available.
I should like the notice to be in large type so that, if an old person had to read it, he or she would have no trouble in doing so. I hope that such bodies as the National Council for Civil Liberties and any organisations for the avoidance of gobbledegook would be consulted, so that the document would he easy to read and understand for people who were stopped at the port of entry.
If the suspect decides to ask to go before a justice of the peace, he should know that he can be in the presence of the justice of the peace when he hears the reasons for the officer's suspicions which led him to require that a search be made of the subject. Again. it is a question of making sure that the suspect is fully aware of his or her rights. I understand that it may not be possible to thrust a great deal of written material about rights into everyone's hand. regardless of whether they want it. However, a code of practice should be instigated whereby an officer, if he is unsure whether a suspect is fully aware of his or her rights, can go to a justice of the peace or offer written details of the procedure to be adopted. In that way, he can be satisfied that the suspect understands exactly what is expected of him. There is an Opposition amendment to that effect.
If there is an intimate or strip search, a record of that should be made and a copy given to the subject showing which parts of the body were searched. The code of practice should state clearly that, in the case of a strip or intimate search, no suspect should be left completely naked at any one time and that any such search should be


carried out on only one half or one third of the body at a time. I hope that the Economic Secretary will be able to confirm that that is the practice now, but it should definitely be included in the code of practice.
The record of the search should also state why the suspect was searched and give the reasons for the suspicions. It should show the name and rank of the authorising officer and of the person conducting the search. It should also give the circumstances that gave rise to suspicion. My hon. Friend the Member for Denton and Reddish (Mr. Bennett) will confirm that that was recommended by the Keith committee but has not been implemented despite its being part of police procedure.
12.15 am
A code of practice should be able to deal with a situation, and let the public know what happens, where, for example, an officer believes that a suspect might injure himself or herself unless a search is made immediately. In some circumstances, that could be a real fear and lead to an officer having to make a difficult decision.
If a suspect is arrested, he or she has the right to telephone a solicitor. That should be made clear in a code of practice. Samples of urine or blood should be taken only if consent is given in writing. That is the case now and it should be spelt out in a code of practice so that everybody knows where they stand.
I understand that officers of senior executive rank or higher have to authorise initimate searches. That should also be the case for strip searches. They demand that a subject is partially naked and it is only right that SEOs or above authorise such searches. Unless I am persuaded by my hon. Friends, I would not go so far as to say that that should apply to rubdown searches.
It should also be clear that if a code of practice is instigated its findings would be admissible in evidence in any subsequent civil or criminal proceedings. Indeed, the code of practice used by the police says that.
Suspects in Customs and Excise matters do not have statutory rights, unlike those arrested by the police. Therefore, all the matters that I have raised require serious consideration, and I shall be interested to hear what the Economic Secretary has to say.

Mr. Darling: We had a useful discussion on this matter in Committee on 12 May. Opposition Members raised matters that appeared to find sympathy with some Conservative Members, although I do not see any of them here at present.
Whenever we discuss the Customs and Excise it is important to emphasise at the outset that most people recognise that its officers have a difficult job, being responsible for the detection of a large number of people who seek to import goods illegally or to avoid the payment of duty.
However, it is important that there is co-operation from the public and confidence that everyone will be treated properly and in the same way. It is important to remember that everyone who is stopped must be presumed to be innocent until they are found to have contravened some regulation.
As I said in Committee, most people have had the experience of being flagged down by a customs officer on their return from a trip abroad to be asked whether they

fully understand what going through the green channel means and to be reminded of the regulations on bringing drinks, cigarettes, and so on, into Britain. I am sure that any hon. Member who has been so stopped has felt slight indignation and resentment at being seized upon because, as far as they were concerned, they were innocent and there was no need to be stopped. People are often stopped in the presence of their fellow passengers and that can be an embarrassing experience.
It would be useful for Customs and Excise staff to have a code of conduct of which members of the public should be aware so that they need not feel aggrieved and embarrassing situations need not arise. While I am sure that the vast majority of customs officers are very courteous and will explain quite patiently, sometimes in the face of abuse, what is required of passengers, unfortunately some cases have arisen from time to time which have given cause for disquiet. Some of those have led to very embarrassing and discomforting scenes at airports and ports around the country. Those cases have led to unfortunate publicity.
The code of conduct should deal with the circumstances under which someone should be stopped. My hon. Friend the Member for Denton and Reddish (Mr. Bennett) referred to the Police and Criminal Evidence Act 1984 which applies only to England and Wales. I referred in Committee to the code of conduct laid down in that Act. That code refers to the powers of stop and search and deals in particular with reasonable suspicion, contrasting that with mere suspicion. It makes the point that reasonable suspicion must be founded on fact. It may well be that there are justifiable grounds to allow a customs officer to stop someone on a hunch. I am sure that there must be many occasions when an officer has a hunch and subsequently finds some goods. I do not know whether that is right or not and I am willing to be persuaded. However, I would like to think that a Customs officer has a reason to stop someone.
It would be useful if the officer had to record in writing his reason for stopping someone. When the Minister replied to this point in Committee, he said that he did not think that that would be practical, as about 44,000 people were stopped a year. However, it would be practical for a customs officer in a particular port to provide someone who is stopped with written reasons why that has happened. Sometimes the reason for stopping someone is discovered subsequently. In other words, the action is justified by the findings rather than the officer being asked to justify his stopping in the first place. There are good grounds for considering the issuing of written reasons.
It would be useful to remind officers that they must have a reason for stopping someone and that when they stop someone the conversation that follows should be conducted as courteously as possible. If possible, the questions put to the passenger should be asked in such a way that fellow passengers cannot overhear what is being said. Once a customs officer begins to go through someone's possessions, that process should be conducted in such a way that other passengers are not privy to the operation. That search can be very embarrassing and unnecessarily humiliating for someone who, as I said, must be presumed to be innocent until contrary evidence comes to light.
If officers are searching for prohibited magazines, or tape recordings, they need only carry out a search that would reveal the existence of those magazines or tape


recordings. Two of my constituents complained to me that they were stopped and searched because they were suspected of bringing prohibited material into this country. They wondered why on earth they were subjected to an intimate body search and internal examination. Common sense would have dictated that that was not necessary if the officers were looking for magazines or tape recordings. It angers people when they are subjected to such searches because that may he construed as something more than a search. I stress that that does not happen regularly, but it happens and it can be an unnecessary cause of aggravation.
Intimate body searches, rubdown searches or simply body searches should be conducted in the presence of as senior an officer as possible, who is fully aware of all the procedures that should be followed.
We should emphasise that at no time should a member of the opposite sex be in a room where someone is to be searched. There is no reason why someone should not have a friend or relative present while such a search is being carried out. It can be frightening to be taken into a room in the presence of two officers whom a person has not seen before. I cannot see what prejudice can be suffered by having a friend present. Some people subjected to such searches have been shocked, frightened and scarred by the experience.
As a matter of course, the public should be informed of their rights at an early opportunity. Often, people are stopped and searched when they do not expect it, and they are not fully conversant with the rights and remedies that are available to them. I do not see what harm would be caused if such a code of conduct were to be published and made widely available.
Many of these points were made in Committee. The Minister's reply was disappointing. He seemed to think that there was no need for a code of conduct. As has been said, the police have one. I cannot see why Customs and Excise officers cannot have one. A code of practice would help Customs and Excise officers, and it would certainly help members of the public. Over the summer months, when, in the nature of things, more of our constituents travel than at other times, hon. Members will receive letters from people who have had unfortunate experiences. Given a little thought and consideration, most unfortunate experiences can be avoided. A code of conduct would be useful. The Minister said two months ago that he would think about the matter. I hope that he will give us the benefit of his thoughts. It would be a welcome step.
I do not believe that it will do any harm to have a code of practice—far from it. It would make the public aware of the difficult circumstances in which Customs and Excise officers work and the valuable work that they do. They need our support to do that work.

Mr. Lilley: I pay tribute to the way in which this issue has been debated in Committee and in the House. All hon. Members have recognised that Customs and Excise officers have a difficult but necessary job which, on occasions, must require extremely unpleasant tasks to be undertaken. We all agree that it is important to ensure that such tasks are undertaken properly and with appropriate safeguards. The clause that we introduced in Committee was designed to give legal backing to guarantees for the citizen. In large measure, they implement the key proposals on the issue.
The hon. Member for Edinburgh, Central (Mr. Darling) made several points. I shall mention two in particular. He said that the present law might allow customs officials to search people on the basis of mere suspicion. In fact, they must have reasonable suspicion, which is closely defined in law and by practice. It means that they require evidence—more than a hunch.

Mr. Darling: I fully appreciate that they must have reasonable grounds. I am willing to be persuaded that perhaps, in some cases, something less than reasonable grounds might be acceptable, but certainly not without a code of conduct. Under the law as it is presently framed, a hunch is not sufficient.

Mr. Lilley: I misinterpreted the hon. Gentleman's point. He suggested, if anything, an extension of customs powers, reinforced by a code of conduct. We do not propose to move in that direction. It would be hard to square it with the general tendency to tighten up civil liberties in that respect.
The hon. Member for Wrexham (Dr. Marek) asked whether there should be a code of practice specifically for customs. Customs officers are obliged to follow the Police and Criminal Evidence Act 1984 code of practice on arrest, search and questioning and have regard to the spirit of the code in matters to which it does not specifically apply because of the different nature of the two professions. Even after listening carefully to the points that hon. Members have made, I am not persuaded that it would be helpful to have a second separate and overlapping code for customs. It would be confusing in practice and would rarely be looked at by members of the public. Of course, it would add to the confusion that those involved in customs and police duties would face.

Mr. Andrew F. Bennett: The Minister says that Customs and Excise ought to follow the spirit of the code that is available under the Police and Criminal Evidence Act. Should that not be translated so that both the general public and the customs officers can see whether they are acting in the spirit of the code? If it is possible for them to do so, surely the code should be written down so that people can check it. It is the arbitrary nature of stopping and searching that has upset my constituents. If people can be told, "This is done in conformity with the code of practice; you have not been singled out for any reason other than the suspicion that you are smuggling something into the country," they will accept that as fair.

Mr. Lilley: There is no need for a code of practice in that respect, as it is established in law that customs officers must have reasonable grounds for suspicion before they can search anyone. If there is an objection to the way in which it is done, the matter is justiciable. It would not be made more justiciable by a separate code of practice spelling out that basic truth.
The citizen, in fact, has rather more rights when dealing with customs officers than when dealing with the police, despite the codes to which hon. Members attach so much importance. Above all, they have appeal rights, which they have not when apprehended in similar circumstances by the police. Those rights make a separate code of practice otiose in such circumstances.
Speaking to amendment No. 81, the hon. Member for Wrexham drew on our debate in Committee. He urged us


to introduce written notification of appeal rights, aimed particularly at those who found it hard to understand or make themselves understood because they were not English-speaking. I took on board the arguments deployed in Committee, recognising that it is perhaps a weakness that in ports and airports written notification of appeal rights is not available in a multiplicity of languages— boldly presented, as the hon. Gentleman suggested—in case customs officers cannot make themselves understood orally.
That, however, is desirable in the first instance. As the hon. Gentleman recognised, in the overwhelming majority of cases officers obtain the consent and co-operation of the public. Although it is unpleasant for them, the public understand the need for such searches. We do not wish to bureaucratise and impede the process by providing for pieces of paper to be thrust at them each time such circumstances arise. I have, however, discussed the matter with the customs, and it has been decided that a booklet should be made available. It would have to be a booklet, as it would contain material in roughly 17 languages— spelling out appeal rights for those who need to know about them.
The hon. Gentleman suggested that, even with the aid of such notification, it would not be possible to be sure that the suspect fully understood his rights. He should in any case be brought before a justice of the peace, who, it was hoped, would have superior powers of communication and would acquaint him with his rights. I find that a rather difficult process to get to grips with. If the suspect cannot be made to understand that he has the right to go before a JP for his objections to the search to be heard, simply bringing him before the JP will not make him understand the position much better. But I trust that we shall never be faced with such circumstances—particularly as, following the hon. Gentleman's representations, the additional reinforcement of a written explanation of rights will be available.
The hon. Gentleman also argued that the appellant should have the right to be heard before a JP, and to hear his case argued. That is what happens in the bulk of cases. The evidence is heard in the presence of the suspect before a JP.
There would be cases where that would be inappropriate. For example, customs officers might have reasons for wanting to search which they could not reveal legitimately to the suspect because they were based on intelligence information. In such circumstances it is reasonable, at the JP's discretion, that the customs evidence should be heard separately.
I hope that I have covered all the issues that have been raised in what, inevitably, is a short debate and reply. I hope also that the concessions that I have been able to announce will go some way to reassuring hon. Members that we accept the spirit of their proposals and will do our best to work within them.

Dr. Marek: Will strip searches, as well as intimate searches, be authorised by officers of senior executive rank, or higher?

Mr. Lilley: Strip searches, as against intimate searches, are generally authorised by a

superior officer to an executive officer. They would usually be authorised by ahigher executive officer. Senior executive officers are not necessarily present or available at every port. If we were to require that only a senior executive officer could authorise such searches, unnecessary delays would sometimes be imposed upon the suspect, who would have to await such an officer being informed and brought from a different port. We restrict that requirement to intimate searches, which are the most infrequent and the most serious sort.

Dr. Marek: The Minister must know that that reply begs more questions than it answers. I recognise, however, that some progress has been made. I hope that the Government will study what I have said and consider whether further provisions should be inserted in next year's Finance Bill. Given the spirit of the discussion, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: No. 21, in page 29, line 42, at end insert—
`(6) References in subsection (2) above to an individual include references to a Scottish partnership in which at least one partner is an individual.'
No. 22, in page 32, line 16, at end insert—
'(6) References in subsection (2) above to an individual include references to a Scottish partnership in which at least one partner is an individual.'.—[Mr. Norman Lamont.]

Mr. Chris Smith: I beg to move amendment No. 100, in page 31, line 21, at end insert—
`parties to a marriage" shall include individuals who have not been married to each other but who have lived together as husband and wife and the term "married couple living together" shall include individuals who are not married but who live together as husband and wife.'

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 101 in page 33, line 41, at end insert—
`parties to a marriage" shall include individuals who have not been married to each other but who have lived together as husband and wife and the term "married couple living together" shall include individuals who are not married but who live together as husband and wife.'
No. 102, in page 37, line 14, at end insert—
parties to a marriage" shall include individuals who have not been married to each other but who have lived together as husband and wife and the term "married couple living together" shall include individuals who are not married but who live together as husband and wife.'

Mr. Smith: The amendments seek to remove the discrimination that exists in respect of maintenance payments that are made on behalf of children of unmarried parents who have subsequently separated. The Bill provides that for new court orders and enforceable agreements, divorced or separated fathers can claim tax relief up to a maximum of £1,490 a year—that is the difference between the single person's allowance and the married couple's allowance—on maintenance that is payable to the mother for herself or to the mother for a child. Unmarried fathers cannot claim tax relief on any maintenance that is paid.
For existing court orders and enforceable agreements from 6 April 1988, divorced or separated mothers can receive up to £1,490-worth of maintenance income tax free. Unmarried mothers will still be liable to tax on all the maintenance that they receive. This basic discrimination against the moneys that are received by unmarried


mothers and paid by unmarried fathers, which do not qualify for tax relief, is something that the amendment seeks to remove.
The provisions in the Bill on the treatment of maintenance payments, in so far as they expressly discriminate against children of unmarried parents, starkly contradict the spirit of the Family Law Reform Act 1987. That Act seeks to remove all forms of legal discrimination against the children of unmarried parents. On 12 May 1987, the Solicitor-General said:
it is the Government's view that, whatever one may think about the rights and wrongs of engendering children whose birth will he illegitimate, it is wrong to take it out on the children, in the sense that they are subjected throughout their lives to handicaps imposed by law."—[Official Report, 12 May 1987; Vol. 116, c. 220.]
The Opposition entirely concur with that sentiment, but the Government seem to be departing from it in the tax arrangements which they are making in the Bill for the payments made on behalf of the children of unmarried couples.
In Committee, the Financial Secretary said on 7 June that he would
study carefully what has been said during our debate to see whether further action is needed
and that he would
examine the measure to see if it is likely to throw up individual hard cases which should he dealt with by amendments on Report."—[Official Report, Standing Committee, 7 June 1988; c. 320–321.]
I know that the National Council for One Parent Families has been in touch with the Financial Secretary and has pointed out to him its view that there will be serious consequences for couples separating in such circumstances, and that the impact on the children will be adverse.
I hope that the Government will be prepared to consider the amendments that we have tabled. We have beeen careful about the drafting. We have lifted much of the Government's own wording from their legislation implementing the poll tax, so I hope that we shall have no challenges from the Government about inaccurate drafting.
It should be remembered that the scale of the problem is considerable. According to the latest figures, more than one in five births occur outside of marriage. Thus, a significant proportion of children potentially will be affected by these discriminatory provisions in the Bill. On the basis of recent trends, an ever-rising proportion of the population is likely to be affected in future. More important than the numbers affected is the principle of equal treatment for all children, which must be defended. Such a blatant contradiction of that, as is enshrined in the Bill as it stands, runs against the principles established under the Family Law Reform Act and should not be allowed to pass unchallenged. We hope that the amendments will commend themselves to the House.

Mr. Norman Lamont: As the hon. Member for Islington, South and Finsbury (Mr. Smith) said, I undertook carefully to study this matter. As the hon. Gentleman knows, the starting point is that, under the new regime introduced by the Bill, there will be no relief for maintenance payments for children, whether their parents are married, divorced, separated, unmarried or widowed. The special problems of single parents are recognised to some extent by the one-parent benefit and by the additional personal allowance.
The hon. Gentleman drew a comparison between married and unmarried couples who have separated—indeed, that was his central point. I believe that there are distinctions. Marriage creates a special legal relationship which is recognised in the tax system. The married allowance is given whether or not the couple have children. The maintenance relief for payments by one divorced or separated spouse to the other recognise that such obligations may continue after the marriage has broken up. It gives relief for maintenance payments to the other spouse up to the equivalent of the married allowance. Again, the relief is available whether or not the couple have children. The clause does allow payments to the ex-wife for maintenance of the children to count for relief as well as payments to the wife for her own maintenance, but that is just recognising the fact that many of the wife's household expenses cannot easily be apportioned between herself and the children.
The situation is different for an unmarried couple. There is no formal legal relationship—I am not making any moral judgment, but simply stating the fact—and the couple will not receive the married allowance. If the cou.ris order maintenance to be paid, it will be for the child rather than the mother. Extending maintenance relief could put the unmarried parent in a more favourable position than the divorced or separated because, with the divorced and separated, it is covering the obligation to maintain the ex-wife, whether or not there are children; it is not primarily for the children.
12.45 am
The amendments illustrate some of the problems of definition. They say that "parties to a marriage" shall include individuals who have not been married to each other. The amendments require the couple to have lived together as husband and wife at some time. They do not say when or for how long. There may be much more uncertainty about whether an unmarried relationship has ended than there is with a marriage, where there is a divorce or formal separation. There may also be unmarried parents who have never lived together, but I assume that the amendment is not intended to extend—

Mr. Hanley: Does my right hon. Friend agree that the amendment as drafted could include two men or two women living together as husband and wife?

Mr. Lamont: I am not sure about that. I do not think that it does.
Inquiring as to whether an unmarried couple are living together is clearly more difficult than establishing whether a marriage has broken up permanently. The question raised was whether the absence of relief for unmarried couples would lead to hardship. It is ultimately for the courts to decide what maintenance is appropriate in a particular case. They will have to take the new tax regime into account, but it does not follow that they will necessarily award less maintenance than they would have done in the past. They will need to consider the facts of the case and the needs of the child.
If the courts award less maintenance, the result will often be that the mother will be compensated by an increase in social security benefits. One of the points made in Committee was that 80 per cent. of single parents are on means-tested benefit. That includes people on family credit or housing benefit as well as those on income support. For those lone parents receiving maintenance


who are above the benefit level, the fact that maintenance will be exempt from tax will be helpful. If they are not paying tax, it will enable them to earn more than before without crossing the tax threshold because they will have their full personal allowance.
I know that the hon. Member for Islington, South and Finsbury will be disappointed. However, if we make the concession for which he is asking, the framework of what we have constructed will come unstitched. The benefits system can pick up most of the cases. One has to decide what is appropriate for the tax system and what is appropriate for the benefits system to pick up. Some of the cases will be better dealt with through the benefits system. I know that the hon. Gentleman has put this forward as a serious point and I regard it as a serious point. I have looked into it and I know of his concern. We will keep the position under review. I hope and believe that his fears will prove groundless. It would be wrong to accept his amendment on the evidence we have so far.

Mr. Chris Smith: I am disappointed, but I am grateful to the Financial Secretary for the sympathetic consideration that I know he has given to the matter.
There is already evidence that maintenance payments are likely to be reduced in value as a result of the measures in the Budget. The Law Society's family law committee met recently and the decisions made at that meeting are recorded in the latest issues of the Law Society Gazette. Those decisions seem to suggest that maintenance payments will be lower in future. I fear that the problems we see as a consequence of what is enshrined in this part of the Bill will come to fruition.
We fear that the Government's apparent reliance on the benefits system to pick up the problem will not be sufficient in view of what the Government are doing to that benefits system.
We are grateful that the Treasury will keep the matter under review. We hope that there will be an opportunity to return to the matter, perhaps in next year's Bill, if it can be demonstrated, as I fear it will, that hardship does result from the Budget changes. In the light of the Government's commitment to maintain a reviewing eye on what happens, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 50

PRIVATE RENTED HOUSING

Amendments made: No. 2, in page 50, line 12, after `company', insert
`by which eligible shares are issued or any subsidiary of such a company'.

No. 3, in page 50, line 15, after 'company', insert 'or subsidiary'.

No. 4, in page 50, line 16, leave out 'relevant period' and insert
`period beginning with the date on which the shares are issued and ending four years after that date'.

No. 5, in page 50, line 21, leave out
'company" does not include a company'

and insert
`references to a company or subsidiary do not include references to a company or subsidiary'.—[Mr. Norman Lamont.]

Amendment proposed: No. 6, in page 50, line 23, at end insert
`or Part VII of the Housing (Northern Ireland) Order 1981'. —[Mr. Norman Lamont.]

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 7 and 8.

Mr. Chris Smith: The amendments extend to Northern Ireland the scope of the business expansion scheme relief for the setting up of companies engaged in letting property. In our debates on the Budget and the Finance Bill, we have consistently made plain our complete and utter distaste for this use of the business expansion scheme.
One aspect of this group of amendments concerns us particularly. Assured tenancies under the Housing Bill do not apply to Northern Ireland, so the Government have come up with the amendments to enshrine the BES provisions for Northern Ireland. However, amendment No. 8 gives the Department of the Environment for Northern Ireland almost blanket approval for establishing whatever terms and conditions of tenancy it considers appropriate under the scheme. At least with assured tenancies—bad though they are—we knew where we stood, because the provisions were enshrined in the Housing Bill. But amendment No. 8 gives the Department of the Environment for Northern Ireland carte blanche to come up with regulations at some time in the future to set up a form of tenancy which will be the subject of considerable tax relief. We cannot but view this open-ended proposal with disquiet and we seek firmer information about the Government's intentions in the amendment.

Mr. Norman Lamont: As I explained in Committee, the market for rented housing in Northern Ireland is different from the market here, in that it is already deregulated to a substantial extent, so the new assured tenancy scheme will not apply there. As the BES relief in the Finance Bill is linked to the assured tenancy scheme, it follows that such relief would not be available in Northern Ireland. However, although Northern Ireland does not have the same shortage of rented accommodation, there is a shortage of good modern housing. We therefore decided to extend the BES relief to Northern Ireland, and that is what the amendments would achieve.
The hon. Member for Islington, South and Finsbury (Mr. Smith) specifically asked about amendment No. 8. It provides that in Northern Ireland a qualifying tenancy is one which complies with conditions to be prescribed by regulations. We intend that the tenancies should be broadly similar to assured tenancies in terms of both the type of property and the security of tenure. They will be very similar.

Amendment agreed to.

Amendments made: No. 7, in page 50, line 26 leave out

`or'.

No. 8, in page 50, line 28 at end insert—
`or
(c) in Northern Ireland, a tenancy which complies with such requirements or conditions as may be prescribed by regulations made by the Department of the Environment for Northern Ireland,'.

No. 9, in page 50, line 29 leave out from 'tenancy' to end of line 31 and insert—
`which falls within subsection (3A) below'.

Page 50, line 33 at end insert—
`(3A) A tenancy falls within this subsection if—



(a) it is a tenancy granted in consideration of a premium within the meaning of Schedule 3 to the Capital Gains Tax Act 1979; or
(b) any option to purchase in relation to the dwelling-house has been granted to the tenant or an associate of his; and in this subsection any reference to the tenant includes, in the case of a joint tenancy, a reference to either or any of the joint tenants.'.

No. 11, in page 50, line 33 at end insert—
'(3B) Regulations under subsection (3) above shall be made by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 and shall be subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954.'.—[Mr. Norman Lamont.]

Schedule 4

BUSINESS EXPANSION SCHEME: PRIVATE RENTED HOUSING

Amendment proposed: No. 12, in page 130, line 21, leave out paragraph 4 and insert—
'4. In section 291 (individuals qualifying for relief), after subsection (1) there shall be inserted—
(1A) An individual is connected with the company if—

(a) he, or an associate of his, occupies or is a tenant of a dwelling-house in which the company holds an interest; and
(b) the interest held by the company is superior to any interest in the dwelling-house held by the individual.".'—[Mr. Norman Lamont.]

Mr. Chris Smith: In Committee we proposed that the disqualification from relief should apply not just to tenants of the properties provided by the company doing the letting but to subtenants. The amendment seems to enshrine that principle, albeit by a somewhat roundabout route and we must therefore give it a warm welcome and thank the Government for picking up the point we made in Committee.

Amendments made: No. 13, in page 132, line 25, after `Wales', insert 'or Northern Ireland'.

No. 14, in page 132, line 29, leave out
'Part V of the Housing Act 1985'

and insert—
'the right to buy legislation'.

No. 15, in page 132, line 30, after 'Wales', insert 'or Northern Ireland'.

No. 16, in page 132, line 34, leave out 'Part' and insert 'legislation'.

No. 17, in page 132, leave out lines 38 and 39 and insert—
'(4A) In sub-paragraph (4) above "the right to buy legislation" means—

(a) in relation to a dwelling-house in England and Wales, Part V of the Housing Act 1985
(b) in relation to a dwelling-house in Northern Ireland, Chapter I of Part II of the Housing (Northern Ireland) Order 1983;
and "flat" and "house" have the same meanings as in that legislation.'

No. 18, in page 132, line 47, leave out 'or'.

page 132, line 51, at end insert—
'or
(c) a dwelling-house in Northern Ireland which is unfit for human habitation within the meaning of Article 46 of the Housing (Northern Ireland) Order 1981 or does not have all the standard amenities within the meaning of Article 59 of the Housing (Northern Ireland) Order 1983.'.

No. 20, in page 133, line 34 at end insert—

'Interpretation of certain expressions: Scotland

18. In the application of the above provisions of this Part

to Scotland. references to acquiring an interest shall be construed, if there is a contract to acquire the interest, as references to entering into that contract and for the purposes of paragraph 16(2)(b) above, a company or subsidiary shall be regarded as owning an interest during the period between its entering into such a contract as regards that interest and its acquiring the interest.'—[Mr. Norman Lamont.]

Clause 51

RESTRICTION OF RELIEF

Mr. David Nicholson: I beg to move amendment No. 72, in page 53, line 15, at end add—
'(3) Where a company has been trading for a period of less than two years, subsection (1) and (4) above shall have effect as if for the amount there specified there were substituted £2 million.'
I shall be brief in view of the time. First, I wish to make a point about the difficulty that larger start-up companies with a potentially low return on capital will have in raising money. Secondly, I wish to get a clearer idea of what the Treasury see as the future, if any, of the BES.
One of the factors contributing to the Treasury's views has been the opinion of the Venture Capital Association that adequate financing exists from its members for start-up companies. In some respects that is unreliable and BES financiers believe that a certain number of projects fail to get venture capital, so never get off the ground. It would also be useful to know whether the Treasury will monitor this over the next year and, if so, how it intends to do so.

Mr. Norman Lamont: We discussed this issue at length in Committee. One of my hon. Friends tabled a similar amendment and I explained that it was right that the BES should be targeted more on small companies and that there had been too much investment on asset-backed enterprises. That would be good for small businesses and the venture capital industry. There can be arguments over the precise figure. There is no science about that. But we shall monitor this because we are aware of all the schemes that go ahead and, if it is necessary, we shall alter this.

Mr. Nicholson: I am most grateful to my right hon. Friend the Minister for explaining the Government's position on this and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6

COMMERCIAL WOODLANDS

Amendment proposed: No. 23 in page 140, line 11, leave out 'he' and insert—
'(a) that person; or
(b) in the event of his death, any other person who occupies them by virtue of any disposition (whether effected by will, under the law relating to intestacy or otherwise) of property comprised in his estate immediately before his death'.—[Mr. Norman Lamont.]

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 24.

Dr. Marek: Will the Government forgo any revenue as a result of amendment No. 23 and have they had any representations about it?

Mr. Norman Lamont: The cost is negligible and yes, we had representations.

Amendment agreed to.

Amendments made: No. 24, in page 140, line 12, at end insert
`and the reference in this subparagraph to a disposition includes a reference to a disposition as varied under section 142 of the Inheritance Act 1984'.

No. 25, in page 142, line 13, at end insert—
'(1A) In section 67(1) of the Taxes Act 1970 (Schedule A), in paragraph 3 of Schedule A (exceptions), after paragraph (a) there shall be inserted—
(aa) to any profits or gains arising from a person's occupation of any woodlands which are managed on a commercial basis and with a view to the realisation of profits, or".'.

No. 26, in page 142, line 33, at end insert—
'(4A) In section 15(1) of the Taxes Act 1988 (Schedule A), in paragraph 3 of Schedule A (exceptions), after paragraph (a) there shall be inserted—
(aa) to any profits or gains arising from a person's occupation of any woodlands which are managed on a commercial basis and with a view to the realisation of profits, or".'.

No. 74, in page 142, line 46, leave out `(2), (4)' and insert—
'(1A), (2), (4), (4A)'.—[Mr. Norman Lamont.]

Clause 65

COMPANY RESIDENCE

Amendments made: No. 31, in page 62, line 40, at beginning insert—
`Subject to the provisions of Schedule [Exceptions to rule in section 65(1)] to this Act.'.

No. 32, in page 62, line 44, leave out subsections (2) and (3).

No. 33, in page 63, leave out lines 20 to 23.

No. 34, in page 63, line 24, after 'section', insert—
`and Schedule Exceptions to rule in section 65(1)) to this Act'. —[Mr. Brooke.]

Clause 94

ASSETS HELD ON 31 MARCH 1982

Sir William Clark: I beg to move amendment No. 106, in page 78, line 17, at end insert—
'(1A) That person may elect whether the asset shall be taxed by reference to the provisions of subsection (1B) or subsection (2) below and such election shall be made by notice in writing to the inspector given within two years from the end of the year of assessment or accounting period of a company in which the disposal is made or such further time as the Board may by notice in writing allow.
(1B) Where an election for treatment under this subsection is made under the provisions of subsection (1A) above the amount of the gain on the relevant disposal shall be calculated under the rules in paragraph 11 of Schedule 5 to the Capital Gains Tax Act 1979 as if references therein to 6th April 1965 where references to 31st March 1982.'.
I need not detain the House for long, but this is an important point. We have a time apportionment amendment to ascertain the value of property, shares or investments on 31 March 1982. The Revenue will say that that is difficult because a valuation in those circumstances would involve the long delay since the asset values in 1982. Earlier, my right hon. Friend said that the Revenue did not have records for rollover relief. I said on Second Reading that I could not understand that. When capital gains tax

was introduced in 1965 the taxpayer had the option of a 1965 valuation or the historical cost to 1985 on time apportionment.
I cannot see why we should not do the same for 1982. One can easily determine the value of a share in 1982, but it is terribly difficult to ascertain the value of property and other assets six years ago. Will my right hon. Friend consider whether it might be much better to have a straight line valuation, from the historical cost up to 1982 and then up to now? That would be much easier for the Inland Revenue and taxpayers alike.

1 am

Mr. Brooke: My hon. Friend has identified the issue of time apportionment. At this time of the evening I shall put to him a case of how it would work: an acquisition cost of shares in 1972 of £10,000, a market value in 1982 of £30,000 and disposable proceeds in 1992 of £100,000. Under the Bill, the gain, ignoring indexation, is £70,000. Again ignoring indexation, with time apportionment the gain would be £45,000—half the difference between £100,000 and £10,000.
A considerable cost to the Exchequer would arise out of my hon. Friend's proposal. In fact, the sheer cost to the Exchequer would be sufficient grounds for rejecting it.

Sir William Clark: It is easy to quote a case of defining the value of shares in 1982, or whenever one bought them. But the valuation of investment property in 1982 cannot be defined as clearly as my right hon. Friend has said. He is oversimplifying the problem. The amount of work and expense to which people will be put in trying to determine a 1982 valuation will be tremendous. The burden of valuation will be put on the potential capital gains taxpayer. I hope that my right hon. Friend will re-examine —not necessarily now, but at some later stage—the possibility of alleviating the liability, responsibility and expense that will be put on the taxpayer.

Dr. Marek: Can the Paymaster General estimate the size of the concession that the Member for Croydon, South (Sir W. Clark) is asking for? The Opposition see no excuse for it—especially at this time in the morning.

Mr. Brooke: The cost of the relief is unquantifiable, but it could well be as high as £100 million.
To answer my hon. Friend the Member for Croydon, South (Sir W. Clark), practical experience of the time apportionment option for 1965 suggests that many taxpayers would feel it necessary to undertake an additional set of computations to see whether they would be better off with time apportionment or with 1982 market values. For those people, there would be an extra compliance burden.
Secondly, over the years a number of people have complained by letter that when they decided which basis to adopt, they did not fully appreciate the implications and made the wrong choice.

Sir William Clark: My right hon. Friend's reply was very disappointing, but because of the lateness of the hour, and because I will pursue it on the next Budget, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 37, in page 78, line 23, at beginning insert—
`Subject to subsection (4A) below,'.

No. 38, in page 78, line 28, leave out second 'or'.

No. 39, in page 78, line 31, at end insert—
'or
(d) where neither a gain nor a loss would accrue by virtue of any of the spcified enactments.'.

No. 40, in page 78, line 38, at end insert—
'(4A) If a person so elects, disposals made by him (including any made by him before the election) shall fall outside subsection (3) above (so that subsection (2) above is not excluded by that subsection).
(4B) An election by a person under subsection (4A) above shall be irrevocable and shall be made by notice in writing to the inspector at any time before 6th April 1990 or at any time during the period beginning with the first day of the first relevant disposal and ending—

(a) two years after the end of the year of assessment or accounting period in which the disposal is made, or
(b) at such later time as the Board may allow;
and "the first relevant disposal" means the first disposal to which this section applies which is made by the person making the election.
(4C) An election made by a person under subsection (4A) above in one capacity does not cover disposals made by him in another capacity.
(4D) All such adjustments shall be made, whether by way of discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to an election under subsection (4A) above.'.

No. 41, in page 78, line 40, at end insert—
'and in subsection (3)(d) above "specified enactments" means the enactments specified in paragraph 1(3) of that Schedule.'. —[Mr. Norman Lamont.]

Schedule 7

CAPITAL GAINS: ASSETS HELD ON 31ST MARCH 1982

Amendments made: No. 57, in page 143, line 17, after '273', insert—
'340(7), 342, 342A, 342B.'.

No. 58, in page 143, line 20, after '1985;', insert—
`(ee) section 486(8) of the Taxes Act 1988;'

No. 43, in page 143, line 21, at end insert—
'1A.—(1) Sub-paragraph (2) below applies where a person makes a disposal of an asset acquired by him on or after 6th April 1988 in circumstances in which either of the relevant enactments applied.

(2) Where this sub-paragraph applies—

(a) an election under subsection (4A) of section 94 of this Act by the person making the disposal shall not cover the disposal, but
(b) the making of such an election by the person from whom the asset was acquired shall cause the disposal to fall outside subsection (3) of that section (so that subsection (2) of that section is not excluded by it) whether or not the person making the disposal makes such an election.

(3) Where the person from whom the asset was acquired by the person making the disposal himself acquired it on or after 6th April 1988 in circumstances in which either of the relevant enactment applied, an election made by him shall not have the effect described in sub-paragraph (2)(b) above but an election made by—

(a) the last person by whom the asset was acquired after 5th April 1988 otherwise than in such circumstances, or
(b) if there is no such person, the person who held the asset on 5th April 1988, shall have that effect.

(4) In this paragraph "the relevant enactments" means—

(a) section 273 of the Taxes Act 1970, and
(b) section 44 of the Capital Gains Tax Act 1979.'.

No. 44, in page 143, line 27, leave out
', and so made for the year 1982–83 or any subsequent year of assessment,'.

No. 45, in page 144, line 34, at beginning insert—
'Except where an election under section 94(4A) of the Finance Act 1988 has effect,'.

No. 46, in page 144, line 36, at end insert—

'Elections under section 94(4A): excluded disposals

11.—(1) An election under section 94(4A) of this Act shall not cover disposals such as are specified in sub-paragraph (2) below.

(2) The disposals mentioned in sub-paragraph (1) above are disposals of, or of an interest in,—

(a) plant or machinery,
(b) an asset which the person making the disposal has at any time held for the purposes of or in connection with-

(i) a trade consisting of the working of a source of mineral deposits, or
(ii) where a trade involves (but does not consist of) such working, the part of the trade which involves such working, or
(c) a licence under the Petroleum (Production) Act 1934 or the Petroleum (Production) Act (Northern Ireland) 1964;
but a disposal does not fall within paragraph (a) or (b) above unless a capital allowance in respect of any expenditure attributable to the asset has been made to the person making the disposal or would have been made to him had he made a claim.

(3) Where the person making the disposal acquired the asset on a no gain/no loss disposal, the references in sub-paragraph (2) above to that person are references to the person making the disposal, the person who last acquired the asset otherwise than on a no gain/no loss disposal or any person who subsequently acquired the asset on such a disposal.

(4) In this paragraph—

(a) "source of mineral disposits" shall be construed in accordance with Schedule 13 to the Finance Act 1986, and
(b) references to a no gain/no loss disposal shall be construed in accordance with paragraph 1 above.

Elections under section 94(4A): groups of companies

12.—(1) A company may not make an election under section 94(4A) of this Act at a time when it is a member but not the principal company of a group unless the company did not become a member of the group until after the relevant time.

(2) Subject to sub-paragraph (3) below, an election under section 94(4A) of this Act by a company which is the principal company of a group shall have effect also as an election by any other company which at the relevant time is a member of the group.

(3) Sub-paragraph (2) above, shall not apply in relation to a company which, in some period after 5th April 1988 and before the relevant time, is not a member of the group if—

(a) during that period the company makes a disposal to which section 94 of this Act applies, and
(b) the period during which an election under subsection (4A) of that section could be made expires without such an election having been made.

(4) Sub-paragraph (2) above shall apply in relation to a company notwithstanding that the company ceases to be a member of the group at any time after the relevant time except where—

(a) the company is an outgoing company in relation to the group, and
(b) the election relating to the group is made after the company ceases to be a member of the group.

(5) In relation to a company which is the principal company of a group the reference in subsection (4B) of section 94 of this Act to the first relevant disposal is a reference to the first disposal to which that section applies by a company which is—

(a) a member of the group but not an outgoing company in relation to the group, or
(b) an incoming company in relation to the group.

13.—(1) In paragraph 12 above "the relevant time", in relation to a group of companies, is—

(a) the first time when arty company which is then a member of the group, and is not an outgoing company in relation to the group, makes a disposal to which section 94 of this Act applies.


(b) the time immediately following the first occasion when a company which is an incoming company in relation to the group becomes a member of the group.
(c) the time when an election is made by the principal company, whichever is earliest.

(2) In paragraph 12 above and this paragraph—
incoming company", in relation to a group of companies, means a company which—

(a) makes its first disposal to which section 94 of this Act applies at a time when it is not a member of the group, and
(b) becomes a member of the group before the end of the period during which an election under subsection (4A) of that section could be made in relation to it and at a time when no such election has been made, and
"outgoing company", in relation to a group of companies, means a company which ceases to be a member of the group before the end of the period during which an election under section 94(4A) of this Act could be made in relation to it and at a time when no such election has been made.

(3) Section 272 of the Taxes Act 1970 shall have effect for the purposes of paragraph 12 above and this paragraph as for those of sections 272 to 281 of that Act.'.—[Mr. Norman Lamont.]

Clause 102

DEEMED DISPOSAL OF ASSETS ON COMPANY CEASING TO BE RESIDENT IN UK

Amendment made: No. 35, in page 83, line 2, leave out

`paragraphs (a) and (b) of subsection (1) shall cease to have effect'

and insert—
'in subsection (1), paragraphs (a) and (b) shall cease to have effect and in paragraph (c) for the words "so resident" there shall be substituted the words "resident in the United Kingdom".'.—[Mr. Norman Lamont.]

Schedule 8

GAINS ARISING FROM CERTAIN SETTLED PROPERTY

Sir William Clark: I beg to move amendment No. 71, in page 144, line 42, after 'settlement', insert—
`made on or after 15th March 1988'.
I wonder whether I might have more success on this amendment. I say at the outset that I have no vested interest in it.
There is an element of retrospection in this. If the settlement is on the settler's own interest, there is a liability of 40 per cent., but if it is for his family, it is 25 per cent. Consequently, there is an anomaly that should be ironed out.
If, as my right hon. Friend said in Standing Committee, the clause was intended primarily to prevent avoidance arrangements developing, my amendment proposes that, if any settlement is made after 15 March, it should be caught. However, for anything done before 15 March—probably 10 or 15 days earlier—there should be no retrospection.

Mr. Norman Lamont: Schedule 8 provides broadly that gains of a settlement in which the settler or spouse has an interest will be taxed as though they accrued directly to the settler. My hon. Friend's amendment seeks to confine that to settlements after Budget day. Existing settlements are already within the scope of the equivalent income tax provisions, and our main objective this year is to assimilate the rates of tax, gains and income.
To exclude existing settlements from schedule 8 would mean that the gains concerned would be completely sheltered from the 40 per cent. charge. Apart from that general point, this would be a substantial advantage and an opportunity for avoidance of the higher rate. There would be nothing to stop further assets being transferred into existing settlements shortly before being sold. The terms of an existing settlement could be varied so that the settler or the settler's spouse would be appointed as beneficiary.
I will consider what my hon. Friend has said, but I do not think that there can be any justification for creating a situation in which capital gains would be taxed at a different rate. In one sense, any alteration in the capital gains tax rate will be accused of being retrospective because it hits accrued gains. That is an inevitable feature of any change made at any time to capital gains. One could not have a safe harbour for capital gains for somebody who happened to have a trust before the 1988 Budget. In some cases the schedule 8 rules may lead to an increase in the tax rate on gains, although there will be other cases where it will be at the basic rate.
The position here is little different from that of other cases where higher rate payers pay tax at 40 per cent. of gains on existing assets. A number of people have put to me the proposition that it may be difficult for the trust to be varied, but I do not believe that that is so. There are a number of ways around that. I shall think about what my hon. Friend has said, but it would not be right to have a different rate just because a trust has been set up.

Sir William Clark: If a settlement has been made and it is not changed, why should not the provisions of my amendment be acceptable? If the settlement is changed, I accept that the extra settlement in the trust will be affected after Budget day, but if there is no change, why should there be this difference?

Mr. Lamont: I do not see why such settlements should not be subject to the same rate of tax as other taxpayers. There is no greater element of retrospection here. I raised the point about changing the trust because some people have argued that, if it is not possible to change a trust, trusts will not have the flexibility to deal with the higher rate.

Dr. Marek: I wait with bated breath to hear how much this concession will cost.

Mr. Lamont: The cost is uncertain—I shall go no further than that. I shall look at what my hon. Friend has said, although I doubt that he has a strong case. I should be happy to discuss it with him.

Sir William Clark: In view of my right hon. Friend's assurance that he will look at it again—if he will do so, it is obvious that the Treasury accepts that there is a case —I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 9

CAPITAL GAINS INDEXATION: GROUPS AND ASSOCIATED COMPANIES

Amendments made: No. 47, in page 148, line 4, at beginning insert—
`Subject to sub-paragraph (2A) below,'.

No. 48, in page 148, line 10, at beginning insert—


'Subject to sub-paragraph (2A) below,'.

No. 49, in page 148, line 18, at end insert—
`(2A) Where—

(a) there is a disposal by a company of a debt on a security owed by another company,
(b) the debt constituted or formed part of the new holding received by the company making the disposal on a reorganisation, and
(c) sub-paragraph (1) or (2) above would apply in relation to the disposal but for this sub-paragraph, neither of those sub-paragraphs shall apply in relation to the disposal, but any indexation allowance which, apart from this sub-paragraph, would be due on the disposal shall be reduced by such amount as appears to the inspector, or on appeal the Commissioners concerned, to be just and reasonable.'

No. 50, in page 148, line 24, after 'person' insert—
'(aa) the company and that person are not linked companies immediately before the disposal,'.

No. 51, in page 148, line 30, leave out 'Where—

(a)' and insert—
`This paragraph applies—
(a) where'.

No. 52, in page 148, line 36, leave out 'and (b)' and insert—
'or
(b) where—

(i) there is a disposal by a company of a holding of shares of another company which is not a holding falling within paragraph (a) above,
(ii) the holding constituted or formed part of the new holding received by the company making the disposal on a reorganisation, and
(iii) but for section 78 of the Capital Gains Tax Act 1979 that reorganisation (or in a case where the holding disposed of derives, in whole or in part, from assets which were original shares in relation to an earlier reorganisation, that reorganisation or any such earlier reorganisation) would have involved a disposal in relation to which paragraph 1 above would have applied or this paragraph would have applied by virtue of paragraph (a) above,
if.'

No. 53, in page 148, line 39, at beginning insert—

'(1A) Where this paragraph applies'.

No. 54, in page 150, line 15, at end insert—
'(1A) In this Scedule the expressions "reorganisation", "original shares" and "new holding" have the meanings given by section 77 of the Capital Gains Tax Act 1979 except that, in a case where sections 78 and 79 of that Act apply in circumstances other than a reorganisation (within the meaning of section 77 of that Act) by virtue of any other provision of Chapter II of Part IV of that Act (conversion of securities, company reconstructions and amalgamations etc.), those expressions shall be construed as they fall to be construed in sections 78 and 79 as they so apply.'—[Mr. Norman Lamont.]

Clause 115

AMENDMENTS OF FINANCE ACT 1985

Amendments made: No. 42, in page 90, line 28, leave out from 'asset' to `as' in line 29.

No. 55, in page 90, line 39, after '273', insert '340(7), 342, 342A, 342B,'.

No. 56, in page 90, line 44, after '1985;', insert—
`(ee) section 486(8) of the Taxes Act;'.—[Mr. Norman Lamont.]

Clause 116

CURRENT YEAR ASSESSMENTS

Amendments made: No. 59, in page 91, line 4, leave out `In section 29(1)' and insert '(1) Section 29'.

No. 60, in page 91, line 5, after 'procedure)', insert—
'shall have effect subject to the following amendments.
(2) In subsection (1),'.

No. 61, in page 91, line 12, at end insert—
'(3) After subsection (1) there shall be inserted—
(1A) Where an assessment is made by virtue of subsection (1)(c) above, any necessary adjustments shall be made after the end of the year (whether by way of assessment, repayment of tax or otherwise) to secure that tax is charged in respect of income actually arising in the year.".'.—[Mr. Norman Lamont.]

Clause 120

THREE YEAR TIME LIMIT

Amendments made: No. 62, in page 94, line 24, leave out `At the end of' and insert 'In'.

No. 63, in page 94, line 25, leave out 'there shall be added' and insert—
'after subsection (3) there shall be inserted'.

No. 64, in page 94, line 26, leave out '4' and insert '3A'. —[Mr. Norman Lamont.]

Clause 131

GENERAL COMMISSIONERS FOR NORTHERN IRELAND

Amendments made: No. 67, in page 103, line 19, leave out '263(5)'.

No. 68, in page 103, line 19, after '1988', insert—
'(and the corresponding enactments repealed by that Act) and in section 11(4) of the Taxes Act 1970'.—[Mr. Norman Lamont.]

Clause 132

CASES STATED IN NORTHERN IRELAND

Amendments made: No. 69, in page 104, line 30, leave out '263(5) and (6)'.

No. 70, in page 104, line 31, at end insert—
'(or the corresponding enactments repealed by that Act), section 11 of or'.—[Mr. Norman Lamont.]

Schedule 10

BUILDING SOCIETIES: CHANGE OF STATUS

Amendment proposed: No. 75, in page 152, leave out lines 12 to 21 and insert—

`Capital gains: shares, and rights to shares, in successor company

5.—(1) Where, in connection with the transfer, there are conferred on members of the society—

(a) any rights to acquire shares in the successor company in priority to other persons, or
(b) any rights to acquire shares in that company for consideration of an amount or value lower than the market value of the shares, or
(c) any rights to free shares in that company,
any such right so conferred on a member shall be regarded for the purposes of capital gains tax as an option (within the meaning of section 137 of the Capital Gains tax Act 1979) granted to, and acquired by, him for no consideration and having no value at the time of that grant and acquisition.

(2) Where, in connection with the transfer, shares in the successor company are issued by that company, or disposed of by the society, to a member of the society, those shares shall be regarded for the purposes or capital gains tax—

(a) as acquired by the member for a consideration of an amount or value equal to the amount or value of any new consideration given by him for the shares (or, if no new consideration is given, as acquired for no consideration); and


(b) as having, at the time of their acquisition by the member, a value equal to the amount or value of the new consideration so given (or, if no new consideration is given, as having no value);
but this sub-paragraph is without prejudice to the operation of sub-paragraph (1) above, where applicable.

(3) Sub-paragraph (4) below applies in any case where—

(a) in connection with the transfer, shares in the successor company are issued by that company, or disposed of by the society, to trustees on terms which provide for the transfer of those shares to members of the society for no new consideration; and
(b) the circumstances are such that in the hands of the trustees the shares constitute settled property, within the meaning of the Capital Gains Tax Act 1979.

(4) Where this sub-paragraph applies, then, for the purposes of capital gains tax—

(a) the shares shall be regarded as acquired by the trustees for no consideration;
(b) the interest of any member in the settled property constituted by the shares shall be regarded as acquired by him for no consideration and as having no value at the time of its acquisition;
(c) where a member becomes absolutely entitled as against the trustees to any of the settled property, both the trustees and the member shall be treated as if, on his becoming so entitled, the shares in question had been disposed of and immediately reacquired by the trustees, in their capacity as trustees within section 46(1) of the Capital Gains Tax Act 1979, for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the trustees (and accordingly section 54 of that Act shall not apply in relation to that occasion); and
(d) on the disposal by a member of an interest in the settled property, other than the disposal treated as occurring for the purposes of paragraph (c) above, any gain accruing shall be a chargeable gain (and accordingly section 58(1) of the Capital Gains Tax Act 1979 shall not apply in relation to the disposal).

(5) Where, in connection with the transfer, the society disposes of any shares in the successor company, then, for the purposes of the Capital Gains Tax Act 1979, any gains arising on the disposal shall not be chargeable gains.

(6) In this paragraph—
free shares", in relation to a member of the society, means any shares issued by the successor company, or disposed of by the society, to that member in connection with the transfer but for no new consideration;
member", in relation to the society, means a person who is or has been a member of it, in that capacity, and any reference to a member includes a reference to a member of any particular class or description;
new consideration" means consideration other than—

(a) consideration provided directly or indirectly out of the assets of the society; or
(b) consideration derived from a member's shares or other rights in the society.

(7) References in this paragraph to the case where a member becomes absolutely entitled to settled property as against the trustees shall be taken to include references to the case where he would become so entitled but for being an infant or otherwise under disability.

Distributions

5A—(1) Where, in connection with the transfer, qualifying benefits are conferred by the society or the successor company on members of the society, the conferring of those benefits shall not be regarded as either—

(a) the making of a distribution, within the meaning of the Corporation Tax Acts; or
(b) the payment or crediting of a dividend for the purposes of section 476 of the Taxes Act 1988 or any regulations under that section (building society interest etc.).

(2) Sub-paragraph (1) above does not preclude any qualifying benefit (and in particular, any qualifying benefit

which in the hands of the recipient would, apart from that sub-paragraph, constitute income for the purposes of income tax) from from being a capital distribution for the purposes of section 72 of the Capital Gains Tax Act 1979, and in that section "distribution" shall be construed accordingly.

(3) In this paragraph "qualifying benefits" means—

(a) any such rights as are mentioned in paragraph 5(1)(a), (b) or (c) above, and any property obtained by the exercise of those rights;
(b) any shares issued or disposed of as mentioned in paragraph 5(2) above;
(c) any shares issued or disposed of, or to which a member becomes entitled, as mentioned in paragraph 5(3) or (4) above, and any interest in the settled property constituted by those shares;
(d) any payment in lieu of a qualifying benefit falling within paragraphs (a) to (c) above;
(e) any distribution made in pursuance of section 100(2)(b) of the Building Societies Act 1986.

(4) "Member" has the same meaning in this paragraph as in paragraph 5 above.'.—[Mr. Norman Lamont.]

Mr. Chris Smith: This amendment brings a substantial new section into schedule 10. It relates to the provisions for the transfer of building societies from mutual societies into public limited companies. As I made plain some hours ago, the Opposition remain deeply unhappy about the prospects of building societies converting and we remain strongly opposed to the rush with which one society, the Abbey National, has decided to propose conversion to its members.
However, one of the points that we made in Committee was that the same fiscal arrangements ought to apply to the issuing of free shares in a created public limited company upon conversion, as the Government were originally proposing. The Government have accepted that point and are including within the provisions, by means of the amendment, the issuing of free shares. That is a sensible move. Although we remain deeply sceptical about the entire process of conversion, we none the less think that within that process the Government's proposal in the amendment is sensible.

Amendment agreed to.

Schedule 11

POST-CONSOLIDATION AMENDMENTS

Amendment made: No. 103, in page I54, line 31, at end insert—
'17A. In section 155(2) of that Act for "282(1) and (2)" there shall be substituted "282".'.—[Mr. Norman Lamont.]

New schedule

`EXCEPTIONS FROM RULE IN SECTION 65(1)

Cases where rule does not apply

1.—(1) Subject to sub-paragraphs (2) and (3) below, section 65(1) of this Act shall not apply in relation to a company which, immediately before the commencement date—

(a) was carrying on business;
(b) was not resident in the United Kingdom, having ceased to be so resident in pursuance of a Treasury consent; and
(c) where that consent was a general consent, was taxable in a territory outside the United Kingdom.

(2) If any time on or after the commencement date a company falling within sub-paragraph (1) above—

(a) ceases to carry on business; or
(b) where the Treasury consent there referred to was a general consent, ceases to be taxable in a territory outside the United Kingdom,
section 65(1) of this Act shall apply in relation to the company after that time or after the end of the transitional period, whichever is the later.

(3) If at any time on or after the commencement date a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 65(1) of this Act shall apply in relation to the company after that time.

2.—(1) Subject to sub-paragraphs (2) and (3) below, section 65(1) of this Act shall not apply in relation to a company which—

(a) carried on business at any time before the commencement date;
(b) ceases to be resident in the United Kingdom at any time on or after that date in pursuance of a Treasury consent; and
(c) is carrying on business immediately after that time.

(2) If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above ceases to carry on a business, section 65(1) of this Act shall apply in relation to the company after that time or after the end of the transitional period, whichever is the later.

(3) If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 65(1) of this Act shall apply in relation to the company after that time.

Cases where rule does not apply until end of transitional period

3.—(1) Subject to sub-paragraphs (2) below, in relation to a company which—

(a) carried on business at any time before the commencement date;
(b) was not resident in the United Kingdom immediately before that date; and
(c) is not a company falling within paragraph 1(1) above,
section 65(1) of this Act shall not apply until after the end of the transitional period.

(2) If at any time on or after the commencement date a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 65(1) of this Act shall apply in relation to the company after that time.

4.—(1) Subject to sub-paragraph (2) below, in relation to a company which—

(a) carried on business at any time before the commencement date;
(b) ceases to be resident in the United Kingdom at any time on or after that date in pursuance of a Treasury consent; and
(c) is not a company falling within paragraph 2(1) above,
section 65(1) of this Act shall not apply until after the end of the transitional period.

(2) If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 65(1) of this Act shall apply in relation to the company after that time.

Supplemental

5.—(1) In this Schedule—
the commencement date" means the date of the coming into force of this Schedule;
general consent" means a consent under any section to which sub-paragraph (2) below applies given generally within the meaning of subsection (4) of that section;
taxable" means liable to tax on income by reason of domicile, residence or place of management;
the transitional period" means the period of five years beginning with the commencement date;
Treasury consent" means a consent under any section to which sub-paragraph (2) below applies given for the purposes of subsection (1)(a) of that section.

(2) This sub-paragraph applies to the following sections (restrictions on the migration etc. of companies), namely—

section 765 of the Taxes Act 1988;
section 482 of the Taxes Act 1970;
section 468 of the Income Tax Act 1952; and
section 36 of the Finance Act 1951.

(3) Any question which arises under any of the provisions of this Schedule shall be determined without regard to the provision made by section 65(1) of this Act.'.—[Mr. Norman Lamont.]

Brought up, read the First and Second time, and added to the Bill.

New Schedule

`DEFERRED CHARGES ON GAINS BEFORE 31ST MARCH 1982

Reduction of deduction or gain

1. Where this Schedule applies—

(a) in a case within paragraph 2 below, the amount of the deduction referred to in that paragraph, and
(b) in a case within paragraph 3 below, the amount of the gain referred to in that paragraph,
shall be one half of what it would be apart from this Schedule.

Charges rolled-over or held-over

2.—(1) Subject to sub-paragraph (2) below, this Schedule applies on a disposal, not being a no gain/no loss disposal, of an asset on or after 6th April 1988 if—

(a) the person making the disposal acquired the asset after 31st March 1982,
(b) a deduction falls to be made by virtue of any of the enactments specified in sub-paragraph (3) below from the expenditure which is allowable in computing the amount of any gain accruing on the disposal, and
(c) the deduction is attributable (whether directly or indirectly and whether in whole or in part) to a chargeable gain accruing on the disposal before 6th April 1988 of an asset acquired before 31st March 1982 by the person making that disposal.

(2) This Schedule does not apply where, by reason of the previous operation of this Schedule, the amount of the decuction is less than it otherwise would be.

(3) The enactments referred to in sub-paragraph (1) above are—

(a) section 21(4) and (5) of the Capital Gains Tax Act 1979 (roll-over where replacement asset acquired after receipt of compensation or insurance money;
(b) section 111A of that Act (roll-over where replacement land acquired on compulsory acquisition of other land);
(c) section 115 of that Act (roll-over where replacement asset acquired on disposal of business asset
(d) section 123 of that Act (roll-over where shares acquired on disposal of business to company);
(e) section 126 of that Act (hold-over where business asset acquired by gift); and
(f) section 79 of the Finance Act 1980 (hold-over where asset acquired by gift).

Postponed charges

3.—(1) Subject to sub-paragraph (3) below, this Schedule applies where—

(a) by virtue or any of the enactments specified in sub-paragraph (2) below a gain is treated as accruing in consequence of an event occurring on or after 6th April 1988, and
(b) the gain is attributable (whether directly or indirectly and whether in whole or in part) to the disposal before 6th April 1988 of an asset acquired before 31st March 1982 by the person making that disposal.

(2) The enactments referred to in sub-paragraph (1) above are—

(a) section 268A of the Taxes Act 1970 (postponement of charge where securities acquired in exchange for business acquired by non-resident company);
(b) section 278(3) of that Act (charge on company leaving group in respect of asset acquired from another member of same group);
(c) section 84 of the Capital Gains Tax Act 1979 (postponement of charge where gilts acquired on compulsory acquisition of shares);
(d) section 111B(3) of that Act (postponement of charge where depreciating asset acquired on compulsory acquisition of land);
(e) section 117(2) of that Act (postponement of charge where depreciating asset acquired as replacement for business asset);
(f) section 79 of the Finance Act 1981 (activation of charge rolled over under section 79 of the Finance Act 1980 on emigration of donee); and
(g) paragraph 10 of Schedule 13 to the Finance Act 1984 (postponement of charge on reorganisation etc. involving acquisition of qualifying corporate bonds).

(3) Where a gain is treated as accruing by virtue of section 278(3) of the Taxes Act 1970 this Schedule applies only if the asset was acquired by the chargeable company (within the meaning of section 278) before 6th April 1988.

Previous no gain/no loss disposals

4. Where—

(a) a person makes a disposal of an asset which he acquired on or after 31st March 1982, and
(b) the disposal by which he acquired the asset and any previous disposal of the asset on or after 31st March 1982 was a no gain/no loss disposal,
he shall be treated for the purposes of paragraphs 2(1)(c) and 3(1)(b) above as having acquired the asset before 31st March 1982.

5.—(1) Sub-paragraph (2) below applies where—

(a) on or after 6th April 1988 a person makes a disposal of an asset which he acquired on or after 31st March 1982.
(b) the disposal by which he acquired the asset was a no gain/no loss disposal, and
(c) a deduction falling to be made as mentioned in paragraph (b) of sub-paragraph (1) of paragraph (2) above which was attributable as mentioned in paragraph (c) of that sub-paragraph was made—

(i) on that disposal, or
(ii) where one or more earlier no gain/no loss disposals of the asset have been made on or after 31st March 1982 and since the last disposal of the asset which was not a no gain/no loss disposal, on any such earlier disposal.

(2) where this sub-paragraph applies the deduction shall be treated for the purposes of paragraph 2 above as falling to be made on the disposal mentioned in sub-paragraph (1)(a) above and not on the no gain/no loss disposal.

6. For the purposes of this Schedule "no gain/no loss disposal" has the same meaning as in paragraph 1 of Schedule 7 to this Act.

Assets derived from other assets

7. The references in paragraphs 2(1)(c) and 3(1)(b) above to the disposal of an asset acquired by a person before 31st March 1982 include references to the disposal of an asset which was not acquired by the person before that date if its value is derived from another asset which was so acquired and of which account is to be taken in relation to the disposal under section 36 of the Capital Gains Tax Act 1979.

Claims

8.—(1) No relief shall be given under this Schedule unless a claim is made—

(a) in the case of a gain treated as accruing by virtue of section 278(3) of the Taxes Act 1970 to a company which ceases to be a member of a group, within the period of two years beginning at the end of the accounting period which ends when the company ceases to be a member of the group,
(b) in any other case, within the period of two years beginning at the end of the year of assessment or

accounting period in which the disposal in question is made, or the gain in question is treated as accruing, or within such longer period as the Board may by notice in writing allow.

(2) A claim under sub-paragraph (1) above shall be supported by such particulars as the inspector may require for the purpose of establishing entitlement to relief under this Schedule and the amount of relief due.'—[Mr. Norman Lamont.]

Brought up, read the First and Second time, and added to the Bill.

Schedule 12

REPEALS

Amendments made: No. 65, in page 158, line 3, at end insert—


'1970 c.9.
The Taxes Management Act 1970.
In section 18, in subsection (1), the words "other than interest to which subsection (4) below applies" and subsection (4).'

No. 66, in page 159, line 58, column 3, after 'Schedule 29,', insert—
'in paragraph 7, sub-paragraphs (1) and (3) and'.

No. 27, in page 161, line 31, column 3, leave out from beginning to end of line 34 and insert—



`Section 67(3).'.

No. 28, in page 161, line 35, column 3, at end insert—



`In section 108, in paragraph 1(b) of Schedule D, the reference to Schedule B.



In section 109(2), in Case VI, the reference to Schedule B.'.

No. 29, in page 162, line 20, column 3, leave out from beginning to end of line 22 and insert—



`Section 15(3).'

No. 30, in line 23, column 3, at end insert—



'In section 18, in subsection (1), in paragraph (b) of Schedule D, and in subsection (3), in Case VI, the reference to Schedule B.'—[Mr. Norman Lamont.]

Short Speeches

The Lord President of the Council and Leader of the House of Commons (Mr. John Wakeham): I beg to move,
That—
> (1) Mr. Speaker may announce at the commencement of public business that, because of the number of Members wishing to speak in a debate on one of the matters specified in paragraph (2) of this Order, he will call Members either between six o'clock and ten minutes before eight o'clock or between seven o'clock and ten minutes before nine o'clock on Monday to Thursday sittings, and between half-past eleven o'clock and one o'clock on Friday sittings, to speak for not more than ten minutes; and whenever Mr. Speaker has made such an announcement he may, between those hours, direct any Member who has spoken for ten minutes in such a debate to resume his seat forthwith.
(2) This Order shall apply to debates on:

(a) the second reading of public bills;
(b) matters selected under paragraph (2) of Standing Order No. 13 (Arrangement of public business) for consideration on allotted Opposition days;
(c) Motions in the name of a Minister of the Crown; and
(d) Motions for an Address in answer to Her Majesty's Speech.
That this Order be a Standing Order of the House.

Mr. Speaker: I announce to the House that I have selected amendments (a), (b), (c) and (e). I suggest that we have a general debate on the motion in the name of the Leader of the House. I will ask the hon. Members concerned to move their amendments at the end. Is that agreed'?

Mr. Wakeham: I will set an example and be brief.
Before commenting on the amendments called it might be of help to the House if I were to give a sketch of the background to the motion, and what I believe to be its advantages.
Following a report by the Procedure Committee in 1978, an experiment was held in the 1979–80 Session, whereby during the Second Reading of Bills, Mr. Speaker was able to apply a 10-minute limit on speeches between 7 pm and 9 pm. However, no assessment was ever made of the experiment, and it duly lapsed.
A second experiment was carried out during the 1984–85 Session. This experiment went slightly wider than the previous one: the debates in which speeches could be limited to 10 minutes were extended to include Opposition days and Government motions, as well as Second Readings; and the hours during which you, Mr. Speaker, could implement the rule were between 6 pm and 8 pm or between 7 pm and 9 pm on Mondays to Thursdays, and between 11.30 am and 1 pm on Fridays. During the Session the temporary Standing Order was applied 24 times, after which the Procedure Committee subsequently reported that the experiment had been a useful and successful one, and recommended the continuation of the temporary Standing Order for a further Session.
The House did not agree to this until February 1986, and the Order came into force for the rest of the 1985–86 Session, during which it was applied six times. Again, the Procedure Committee monitored the experiment and this time recommended that the temporary Order be made permanent. Today's motion seeks to give effect to that recommendation and in moving it, I should like to thank the Committee and its chairman, my hon. Friend the Member for Honiton (Sir P. Emery), for their work.
I propose just one alteration. Previous experiments did not include the debate on the Address in the list of those occasions when you, Mr. Speaker, might decide to restrict speeches. This was because the experiments, being

sessional orders, were not usually approved until after the debate on the Address had taken place. I have added this debate to the list. As a major debate on the Floor, it is similar to Government motions and Opposition days in nature, and it would seem odd if it were not covered by the Standing Order I propose.
The pros and cons of a short speech rule were well explained in the Procedure Committee reports after each of the two experiments in the last Parliament, and are generally known in the House. I do not need to rehearse them fully now. The advantages are not revolutionary—not every Member who wishes can be called in a debate when the rule is in operation, but from the Chair's point of view, the rule does guarantee scope to call at least 12 Members between 6 pm and 8 pm or 7 pm and 9 pm

Dr. Alan Glyn: Am I correct in saying that this is the first time that this Order is being made permanent rather than experimental, and that it will be incorporated, as it is on the Order Paper, in the Standing Orders?

Mr. Wakeham: My hon. Friend is right. It is the first time. The previous two occasions were experimental and were considered afterwards by the Select Committee on Procedure, whose recommendation we are seeking to implement tonight.
Moreover, judging from the experiment, the rule seems to have had a salutary effect on those speaking both before and after the two-hour period. They also have tended to keep their speeches shorter. On the debit side, there was perhaps a greater reluctance by some Members to give way when making a short speech, but interventions nevertheless continued to occur and the character of debate was not greatly affected. In any case, I do not think it practical to implement the kind of complicated stopwatch approach that the amendments in the names of the hon. Member for Denton and Reddish (Mr. Bennett) and my hon. Friend the Member for Stamford and Spalding (Mr. Davies) would necessitate.

Mr. Tam Dalyell: Does the right hon. Gentleman agree that we are not talking so much about the stopwatch approach as about allowing you, Mr. Speaker, some discretion on the subject of interventions?

Mr. Wakeham: The wording of the motion gives you, Mr. Speaker, some discretion in deciding when to bring in the rule. The motion states that Mr. Speaker
may, between those hours, direct any Member who has spoken for ten minutes in such a debate to resume his seat forthwith.
It does not state that he has to do so.
Mr. Speaker, I presume that you would be reasonable and would allow a Member making an important speech to finish his sentence, but that is a matter for you, Mr. Speaker, and not for me.
This is an essentially modest proposal, for a rule to be applied by you, Mr. Speaker, at your discretion, when you consider that the number of Members wishing to speak in a debate warrants it, and to be applied for a period of two hours only. If it were to extend to all Back-Bench speeches, along the lines of the amendment being proposed by the hon. Member for Newham, North-West (Mr. Banks), I would not be proposing it. I consider it essential that Back Benchers should continue to be able to speak for longer than 10 minutes, if they wish to do so, perhaps because they are spokesmen of other parties, regions or committees, or because they have a particular constituency or personal interest, or a distinctive and complicated case to put forward.
I understand the reasons behind the amendment in the name of the hon. Members for Orkney and Shetland (Mr. Wallace) and for Southport (Mr. Fearn), but, if we are to preserve flexibility, I believe that it is necessary for you, Mr. Speaker, to have the option of calling for short speeches during either of the two-hour periods proposed. I have no doubt that you will take into account, where you feel it to be necessary, the desire of the spokesmen of parties other than the official Opposition to speak before the rule comes into operation.
I recognise that the proposal will not find favour with those who argue against any restriction on the length of time a Member may address the House. Equally, others, as is evidenced by one of the amendments tabled to the motion, are pressing for the ten minutes rule to be extended to almost all speeches. Both my predecessor and myself have tried long and hard to find a solution that is generally acceptable and I believe that the motion before us is the nearest we can come to it. It is now for the House to decide.
Mr. Speaker, the House has now had three experiments on short speeches, the latter two being the subject of careful assessment and reporting by the Procedure Committee. The experiments were generally felt by the House to be a success and I believe that the time has now come to make this modest proposal into a Standing Order of the House.

Mr. Bruce Grocott: I shall begin on a sour note by saying that, if anything shows that some of our procedures need to be changed, it is the fact that we are here at 1.23 am, when the nation sleeps, still rabbiting on about various matters. In many respects, our procedures are utterly bewildering to people outside. They do little to ensure democratic control of the Government and I look forward to other changes than the modest ones that we are considering tonight. I am in favour of short speeches and of the motion and, in making a speech on short speeches, I shall ensure that my remarks are short.
I am a sceptic about excessive complications in our Standing Orders. It is important that not only hon. Members should understand them but the public too, particularly if we are to allow the cameras into this place. Therefore, I do not want to see excessive rigidity in the way in which we conduct our debates.
The merit of the proposal is that it is restricted. It has been tested twice in this form in recent years and it has not drastically altered the character of debate in the House. The anxiety expressed by my hon. Friend the Member for Denton and Reddish (Mr. Bennett) that any restriction on speeches would limit interventions is legitimate, but in practice such restrictions have not altered the character of debates that much. The third report of the Select Committee makes the point that it is important for everyone to bear in mind that we should try to preserve the character of debate, which involves exchanges which enliven a debate which could otherwise be rather dull.
The experiment has shown that the proposal has the clear advantage of enabling more hon. Members to speak in important debates. The increase is not dramatic—three or four, or perhaps more, in a Second Reading debate. We all know the great frustration of not being able to speak. We also know the frustration of having to explain to bewildered constituents why we have not spoken on, say, the Second Reading of the Local Government Finance Bill, in vain pointing out the simple arithmetic that there are 650 hon. Members and, with luck, about 20 will be able to speak. We are an unusually large Parliament—I think that we are the largest in the Western world—so pressure on time is severe.
The proposal is limited and it has been tested. It may well be desirable to extend it in future. I know that my hon. Friend the Member for Newham, North-West (Mr. Banks) is seeking an extension of the 10-minute rule and there may be good grounds for that at a future date. However, at this stage the right thing would be to do as the Select Committee on Procedure has suggested.
Some hon. Members suggest that 10 minutes is a rather severe restriction. I have spent some time in an industry where 20 seconds is considered a generous allotment of time—scriptwriting for television—and working at the scripting rate of three words a second and 20 seconds per promotion, as hon. Members who are familiar with the Finance Bill will know, means 60 words, and 60 words in prime time is worth most other forms of communication available to any of us.
Anyone who can do the arithmetic will know that a 10-minute speech at three words a second is about 1,800 words. I tend to think that any hon. Member who cannot put his case in 1,800 words probably does not have a precisely thought-out case. I hope that I have managed to contain my speech to 1,800 words and have not badly overrun. That is about the number of words on the front page of most newspapers, give or take a little. It is a lot of words and it is important —

Mr. Tony Banks: There are about six on the front page of The Sun.

Mr. Grocott: My hon. Friend makes a valid point, but I was talking about newspapers.
The advantage of the proposal is that it may well lead to sharper, more precise, contributions. It may make our debates more interesting to the outside world. Ten minutes is a long time, and I am in favour of the proposal.

Sir Peter Emery: I welcome the proposed Standing Order at long last. It has been on the Order Paper for nearly 18 months. I hope that some of the recommendations in future reports from the Procedure Committee will come before the House a little more quickly, particularly if we can debate them shortly and precisely.
The Procedure Committee has gone to a great deal of trouble especially to ensure that the character of debates is not altered. The former right hon. Member for South Down and for Wolverhampton, South-West, Mr. Powell, believed that the experiment would affect the complete character of debates and he urged people to vote against the proposal when it came before the House some time ago. However, the proposal has not altered the debates. There is flexibility open to Mr. Speaker as he can allow an hon. Member to speak for a moment or two longer than the 10 minutes—even though the rule is there—if the hon. Member has allowed interventions or if it is obvious that something needs to be said. My right hon. Friend the Leader of the House stressed that point.
I believe that the proposal offers a major benefit to the Chair. While the Chair is in a difficult position because it cannot speak for itself, the Committee took advice from occupants of the Chair who told us that the proposal was a useful method to ensure that a few more hon. Members —only a few more, as this is not a revolutionary proposal —perhaps two, three or four more, could speak.

Mr. Dalyell:: With regard to the character of the House, the hon. Gentleman's memory and mine go back 25 years to when he was the hon. Member for Reading. Why were the debates in the House massively more attended then than now? Is the hon. Gentleman sure that the character of the House has not been altered?

Sir Peter Emery: The Committee studied that point. If we look back long enough we discover that the speeches of the Chancellor of the Exchequer were thought to be quite inadequate unless they ran for five or six hours. I do not believe that we have lost anything in relation to the Budget speech. I remember when I was the hon. Member for Reading that the Chancellor of the Exchequer would speak for about two hours. He would wait until the market had finished. He would rise at 3.30 pm and not finish until 5·15 pm. Sensibly, the Chancellor's speech now runs only for about an hour. I do not believe that that has altered the character of the House; I think that it has improved it.
I urge the House to accept the recommendation from the Procedure Committee without the amendments. The most important amendment—with no disrespect to the others—is that in name of the hon. Member for Orkney and Shetland (Mr. Wallace). I understand that the minor parties might be concerned if they believed that their spokesmen might be limited in a major debate in which they wanted to make specific points because a statement had been made which delayed the start of debate until 5 pm. Half an hour might be allowed to the two Front Benches and at 6 pm Mr. Speaker might remind the House that he had announced earlier that the short speeches rule would apply. The minor parties would then discover that their spokesmen would be limited to only 10 minutes. I do not know when that situation arose during the experiment.
I believe that in many instances the House works on the good will of all sides working with the Chair. I believe that

in the situation that I have described, the Chair is likely to be entirely sympathetic if a major point had to be made. The minor parties' worry, which the Committee considered fully, exists more in theory than reality. If it was found that that was not the case and there was a major objection, I am certain that the Procedure Committee would be willing to look at the matter again. On the whole, I believe that that circumstance would not arise.

Mr. Tony Banks: The hon. Gentleman is saying that the matter is at the discretion of the Chair. He does not agree with my amendments, but they come within the discretion of the Chair. They do not pose any dangers for minority parties.

Sir Peter Emery: I understand what the hon. Gentleman says.
The Committee accepted that there are several occasions on which it is necessary for an hon. Member to have more than 10 minutes to make a speech. I have implied that. We do not wish to leave the decision on which speech shall or shall not be of a certain length purely to the discretion of the Chair. We are trying to give guidance to the Chair and suggest that exceptions will be limited and should not worry the House. The Select Committee considered that there will be times when an hon. Member who has a specific or constituency point to make and who needs longer than 10 minutes should not be given prime time—in other words, before 8 o'clock. If the ten-minute rule can apply from 6 o'clock until 7.50 pm, an hon. Member who must make a lengthy constituency point will have a chance to do so between 8 o'clock and 9 o'clock, which is not prime time.
We do not see why an hon. Member who wishes to make a long speech must always be called before the ten-minute rule applies from 7 o'clock until 9 o'clock. It is perhaps a convoluted point, but it is a real one. That is why we considered that the Chair should have the discretion to call an hon. Member from 6 o'clock until 8 o'clock, rather than only from 7 o'clock until 9 o'clock.
This matter will be particularly important when the televising experiment occurs. Many more hon. Members will want to be called to speak. Therefore, it is even more important for the Chair to have the discretion to use the rule sensibly and sparingly. I hope that the House will support the Procedure Committee's recommendations and adopt the measure as a Standing Order from now on.

Mr. James Wallace: As the hon. Member for Honiton (Sir P. Emery) said, the amendment in my name and that of my hon. Friend the Member for Southport (Mr. Fearn) is directed to the difficulty that those of us in a so-called minority party—not the major Opposition party—fear might arise if the Standing Order were to come into being, with the possibility of there being short speeches between the hours of 6 pm and 8 pm. As has been said, there may be days on which there will be statements, points of order, Standing Order No. 20 applications, and ten-minute Bills. It has been argued that my party's contributions could possibly be limited, if the ten-minute rule came into effect at 6 pm. It was well recognised in the Procedure Committee's report that there is often a more general argument to deploy, and that


should not be restricted. The hon. Member for Honiton rightly said that he could not recall an occasion during the experiment when that had happened.
You may recall, Mr. Speaker, one occasion when the rule was to apply from 6 pm, in the days when I perhaps had a greater community of interest with the right hon. Member for Plymouth, Devonport (Dr. Owen). On that occasion, it appeared that there was an attempt by a previous speaker to carry his speech over into the 6 o'clock to 8 o'clock period. The hon. Member for Woolwich (Mr. Cartwright) persuaded you, Mr. Speaker, to resume the Chair. You announced that, rather than running from 6 pm till 8 pm, the period would be from 7 pm to 9 pm.
From what I have heard tonight, I think that there is a recognition in the House that the minority parties have a general case to deploy, and it has been useful to get that on the record. Although we cannot ask you to give any undertakings, Mr. Speaker, I am sure that you have heard what has been said by other hon. Members.
The hon. Member for Newham, North-West (Mr. Banks) argued that his amendment would not stop the Chair exercising its discretion to allow some flexibility to a minority party spokesman, someone with a particular constituency interest or, for that matter, a Select Committee member. When there is great pressure on the Chair from hon. Members wishing to speak, there are always many who are disappointed at the end of the day. The Chair would be put in an invidious position if it had to decide who should and who should not have a longer time in which to speak within the 10-minute period. For that reason, I do not particularly agree with the hon. Gentleman's amendment.
Nevertheless, I do not propose to push my amendment to a vote, as I feel that it has achieved its purpose of focusing attention on the position of minority parties. I am encouraged by what has been said, and I am sure that you, Mr. Speaker, will have taken note of it.

Mr. Quentin Davies: I am very sympathetic to the purposes behind the motion in the name of my right hon. Friend the Leader of the House, and I urge hon. Members on both sides of the House to support it. However, I find it more difficult to follow his logic when he says that he believes that the introduction of ten-minute speeches would have no material effect on the willingness of hon. Members to accept interventions.
It is obviously desirable for more hon. Members to be able to take part in debates, and it is equally desirable that we should all have an inducement to be as precise and succinct as possible. I shall try to do that this evening, even without a ten-minute limitation.
But it is, I feel, of major importance that nothing should be done to damage what I believe—if I can say so without pretentiousness, having sat in the House for only a year —is one of the great qualities that distinguishes this place from so many other parliamentary assemblies throughout the world. Many amount merely to ceremonial auditoria, with an endless succession of set speeches delivered in set times and in a set form. One of the great qualities of this House is the spontaneity—and hence, often the unpredictability—of our debates. There can be cut and

thrust; there can be unrehearsed interventions and unprepared replies; there can be clashes of ideas and hon. Members can think on their feet.
I find it difficult to believe that hon. Members would still be prepared to give way to interventions, and that debates could remain as spontaneous, if speeches were limited to 10 minutes. I would be extremely wary of taking interventions if I had planned a speech that I expected to last for eight or nine minutes, because there would be a good chance that I would not be able to finish it in the way that I had intended. In extreme cases, unless an amendment were accepted along the lines that I propose, hon. Members might find that they were never able to rise to their feet again and complete their speeches at all.
There are two arguments against an amendment such as mine. One is that it is technically not feasible to extend the time to take account of interventions. I have not heard tha argument developed very credibly as yet, although I remain open to persuasion. It seems to me that it would be possible for the Clerk to advise you, Mr. Speaker, or your Deputies, of the time taken by interventions. Perhaps you or one of your Deputies could give an hon. Member a warning one minute before his time was up. If there had been interventions, he might find it difficult to know where he stood simply by watching the clock. That is not infeasible.
The second alleged problem is one that I too have some difficulty in understanding. It is said that if an amendment along the lines of the one that I have suggested were put into effect, there would be a danger of filibusters. It is argued that hon. Members could avoid a ten-minute rule by persuading their colleagues deliberately to intervene to prolong the debate. The House has lived with the danger of filibuster, and indeed its existence, for a long time. I have no doubt that some of the experts, such as my right hon. Friend the Member for Castle Point (Sir B. Braine), could tell us for how many centuries the danger has existed. It is one that could only be lessened if there were a ten-minute speech rule. I believe that the change would be only for the better.

Mr. Dalyell: The hon. Gentleman should be careful about the use of "danger". Parliamentary time is the only weapon that an Opposition has under our system. If ever the hon. Gentleman goes into opposition and he has a cause, he will be grateful for parliamentary time. The use of that time is not necessarily filibustering.

Mr. Davies: I take the hon. Gentleman's point, which reinforces my argument. The risk or possibility of debates being extended by speeches being extended unpredictably is not necessarily undesirable.
Before the House takes a decision on this issue, I hope that it will consider carefully whether there is not a means —perhaps along the lines that I have suggested, or along different lines—whereby we can get the best of both worlds, which is to say shorter speeches and all the benefits that they will bring along with retaining the essential quality of spontaneity of the House.

Mr. Tony Banks: There is a good attendance in the Chamber, given that it is nearly 1.50 am. There has been much criticism in the newspapers about our sparsely attended debates, and usually the criticism comes from journalists whose only grasp of


history is the knowledge of who bought the previous round of drinks. The criticism tends to reveal a lack of appreciation of the nature of the modern Parliament. We do not sit in the Chamber as independent Members listening to the ebb and flow of the debate, making up our minds when the Division Bells ring how we shall vote. A good speech might give us pleasure but it will rarely change anything in this place. We know that we are here because of our party labels. Once we are here, either because of the whipping system that operates within the parties, or because of our own ideological reference points, voting patterns are highly predictable. There is the occasional exception, but it is the exception that proves the rule.
There is not a political need for long speeches to attempt to influence the outcome of a vote. There might be good reasons, however, for long speeches in circumstances and on occasions other than those specified in the motion, but these will not be affected by the proposed change in the Standing Orders. As my hon. Friend the Member for Linlithgow (Mr. Dalyell) said in an intervention, the filibuster—the use of time—is the only weapon that the Opposition have.
I have in mind some highly controversial private Bills that have been before the House. Members have used their right to make long speeches to try to thwart such Bills. It is a legitimate tactic. It might not be liked by those who are sponsoring such a Bill, but it is a legitimate use of parliamentary procedure. That is not affected in any way by the motion. This morning, we are talking about debates in which there is a great deal of pressure from hon. Members to speak. In such circumstances it becomes extremely frustrating to sit there like Cicero or Demosthenes, burning to speak while some boring old fartbag goes on for hours and hours and rambles on endlessly.
There is no one as selfish as a Member of Parliament with a very long speech whose time has come. We have all had to suffer that. There are times when I believe that nothing is too horrid to happen to such a miscreant. I would want you, Mr. Speaker, to have much greater powers, perhaps a series of levers and trap doors which would send the individual plunging into the cellar, or perhaps they should be forced to learn by heart the collected works of the hon. Member for Caithness and Sutherland (Mr. Maclennan). He is not here, and it is always good to be rude about someone who is not here.
There is general agreement that ten minutes is long enough for most speeches. Most people would say that that is nine and a half minutes too long. As George Eliot wrote, "Blessed is the man who, having nothing to say, abstains from giving us wordy evidence of the fact." If Abraham Lincoln knocked off the Gettysburg address in three minutes, quite frankly, hon. Members with three times longer to make a point have ample time indeed.
My amendments seek to give the Chair maximum flexibility in announcing the ten-minutes rule. It is a matter of discretion for the Chair. It is nothing to be worried about. Under the amendments the Chair can exercise discretion and announce that there will be a ten-minutes rule at any particular time. Of course, that will enable the Chair to structure and order our debates. Not everyone who wishes to speak in a debate actually writes in to the Speaker's Office and gives notice of a desire to speak. It might well be only when the debate starts that the occupant of the Chair realises how many hon. Members wish to speak, or during a debate a large number of hon.

Members are suddenly moved to speak. That would allow the occupant of the Chair to say, "In view of the number of hon. Members now wishing to speak, I intend to operate a ten-minutes rule."
We are not laying ourselves open to any danger whatsoever; we are saying that we elect a Chair and the Chair is there to exercise discretion on our behalf and allow as many hon. Members as possible to speak.
I see no reason to restrict the ten-minutes rule to certain time bands. Clearly, we are here to get what we are saying heard and detected outside. In terms of securing media coverage, that oftens means that the more points we can get in before 6 pm, the more likely we are to find the odd sober journalist capable of writing.
In my second amendment, I have accepted the need to allow Front Benchers winding up longer than the ten minutes. However, having listened to some recent winding-up speeches, quite frankly I believe that they do not all deserve such generous treatment. It is still at the discretion of the Chair. Both my amendments give discretion to the Chair. That means that Mr. Speaker, or whoever occupies the Chair, may direct an hon. Member to cease a speech. I hope that the amendments, which I have tried to move in a short and sincere fashion—which is a reasonably good description of myself—commend themselves to the House.

Dr. Alan Glyn: First, I congratulate the Chairman and the Procedure Committee on their work now and over the years, as this measure has taken a very long time. In 1966, the order was debated, but not moved. I and my colleagues then tabled early-day motions entitled "Opportunities for Back Benchers" from 1971 to 1984 when the experiment was introduced. It was unfortunate that it was only an experiment, as I believe that it has proved a great success. It is particularly important because the number of parties and, of course, the number of Conservative Members have increased.
As the hon. Member for Newham, North-West (Mr. Banks) has said, it is important that your discretion, Mr. Speaker, should still exist and that you can use it within the prohibited hours. It is almost impossible for people not to say what they want to within 10 minutes. I am sure that may have exceeded that sometimes because of interventions. I can see that adding injury time for interventions is difficult. However, it would be up to you, Mr. Speaker, to allow the hon. Member extra time for interventions. I am told by the Clerks that it would be difficult to time the interventions and add injury time, and I accept that.
When I first came to the House in 1959 there were few Back-Bench Privy Councillors. Now, almost every other Member is a Privy Councillor. I once said to a Privy Councillor, "You are lucky now because you will be able to speak when you like." He said, "That would be an abuse of my power." It annoys many Back Benchers who have sat here for hours that a Privy Councillor can walk into the Chamber and without warning, within two or three speakers, he is able to address the House. That will have to be looked at.
I know, Mr. Speaker, that you have been giving a little less privilege to Privy Councillors. "Erskine May" lays down the rights of a Privy Councillor but that is out of date because of the number of Privy Councillors on the Back Benches.
After all these years we have at last reached the point where the House has to decide whether to adopt the order permanently. This is the first chance that the House has had to do that, as my right hon. Friend the Leader of the House has confirmed. Since 1987, a successful experiment has not been able to be operated simply because we have been unable to find time to debate the measure. I am sure that the experiment was a success. The ten minutes rule will give more hon. Members a chance to speak. I do not think that television has anything to do with the matter. There is simply more pressure on you, Mr. Speaker, because more hon. Members wish to speak and express their opinions. If they cannot do that in 10 minutes, they should not do it at all.

Mr. Andrew F. Bennett: It is sad that we are now proposing to put the experiment into the Standing Orders permanently without having tried one or two other variations to see whether we could have done better than what I believe is a somewhat cumbersome order.
I think that everyone agrees that what would be most effective would be if every hon. Member showed self-restraint. We all know from experience that that does not happen. Every time, somebody—often more than one person—abuses the request to keep speeches to a reasonable length so that more hon. Members can take part.
If we are to have restraint, we should try to organise it in as flexible a fashion as possible. The most effective way is to confer greater powers on the Chair. I support the amendments tabled by my hon. Friend the Member for Newham, North-West (Mr. Banks).
Let me remind the House of the greatest abuse. At around 8 o'clock, calculations are done; the Whips move from side to side and it is worked out that perhaps six or seven more hon. Members can be allowed to speak. They will probably have been present throughout the debate. Instead of keeping to the time allocated, one of those hon. Members may go on at length so that one or two of the others who have sat through the whole debate get squeezed out.
The great advantage in the amendment of my hon. Friend the Member for Newham, North-West would be that the Chair could announce at any time that speeches were to be kept to 10 minutes. That would make it easier to formalise what the Whips try to do at the moment, which is to allow a given number of hon. Members to speak at the end of the debate.

Mr. Nigel Spearing: My hon. Friend is using terms that were never used years ago. The term used then was probably to the effect that it was for the convenience of all that the arrangements were made. Does he remember how Mr. Speaker Lloyd used to remind us that the Chair had a memory? Would not that memory help to reinforce the informal arrangements, which often work quite well?

Mr. Bennett: A possible alternative might be a blacklist or a memory of those who abuse the system.
We should be introducing a greater flexibility into the system, and we should have tried several other

experiments. For example, we could have allowed the Chair to introduce a ten-minute limit at any time during a debate, as it became clear how many hon. Members wished to speak. I would also argue that a time limit other than 10 minutes may be appropriate on occasions—especially towards the end of the debate when we may be trying to enable several hon. Members to speak.
The members of the Procedure Committee may not be the best people to judge whether the experiment was of the best. By that Committee's very nature, those who serve on it tend to be hon. Members with considerable experience of the House. They therefore tend not to be called late in a debate. I suspect that not many hon. Members who serve on the Procedure Committee spent much time sitting in the Chamber during the experiment.
Although it was a very big plus that more hon. Members were called in debates during the experiment, there were at least two distinct disadvantages. First, many more hon. Members went to the Chair pleading to be called before the point at which the time limit came into operation. That does not seem to me to have been particularly helpful, and on at least one or two occasions hon. Members made pressing scenes in an attempt to be called early in the debate. It would have been far better had the Chair been able to make it clear that the ten-minute limit would apply as soon as the opening speeches from the Front Benches, and perhaps from one of the minority parties, had been made.
The second major disadvantage was that the experiment cut down interventions. Hon. Members felt that they would get their 10 minutes without being granted injury time for interventions and they therefore did not give way. It has been emphasised that the proposal before us provides flexibility. However, I think that it would be far better if the amendment in my name was accepted, to make it clear that injury time would be given. If it is possible for us to time the two minutes for Tellers to be named and the eight minutes for the doors to be locked, it should be fairly easy to time a 30-second intervention in a speech and to allow for that. If we want to have real debate, it would be better to encourage interventions, and that should be done.
There is also a negative reason why we should not make it too difficult for hon. Members to intevene. That is simply that if an intervention is not accepted, hon. Members tend to shout their remarks from a sedentary position. That is not a particularly desirable development.
The practice has been creeping into the House that when an hon. Member refuses to give way, a spurious point of order is raised into which the intervention is worked, sometimes with ingenuity but sometimes with little ingenuity. They waste even more time because you, Mr. Speaker, have to point out that it is not a point of order for the Chair. For both those reasons it is important to make it clear in any permanent change that we do not wish to discourage interventions.
There is the question whether interventions from both sides or only the opposite side should qualify for injury time. My amendment (d) seeks to allocate injury time only for interventions from the opposite side of the House because that encourages debate and interchange. On occasions an intervention from one's own side is simply a device for three hon. Members to get their view on the record rather than one. Sometimes when two or three hon. Members are waiting to speak the first agrees to accept an


intervention from the others. Therefore, it would be worth while to make it clear that injury time should be given for genuine debate, which is usually across the Chamber.
I hope that the House will question whether we should put the proposal in our Standing Orders rather than continue experimenting with one or two imaginative options. If such provision is to be made permanent in our Standing Orders, I hope that we shall spell out that 10 minutes should not discourage interventions.

Mr. Julian Brazier: It cannot have escaped your notice, Mr. Speaker, in the long time that you have been here that Members of Parliament are extremely generous at least in one respect: in giving others our views. As you said to us when you first welcomed us to the House, with 650 of us that tends to make a few problems for you.
I welcome the motion in the name of my right hon. Friend the Leader of the House. I am sorry that I was a little late and did not hear all the earlier arguments, but it seems that there are only two arguments against it. The first is that it would diminish the rights of the Opposition, but Opposition Members who have spoken in favour of the motion made it clear that that is not the overwhelming view on their side. The second is that, because newer Members inevitably see themselves getting a smaller slice of the cake than senior Members, such as Privy Councillors, it is felt that as Members become more senior they will favour arrangements which benefit them increasingly.
There is a difference between a new Member now and a new Member as little as 10 years ago. Fifteen years ago only three parties were in Parliament, excluding one or two individual Members, whereas now there are 10. Fifteen years ago there were only three or four Committees, whereas now we have a whole structure of Select Committees and the Chairman of the relevant one is nearly always called after the Front-Bench speakers. The result is that Back Benchers' slot of the total time has got progressively less.
At the same time, for several reasons, some relating to constituency pressures and some to parliamentary pressures, hon. Members are having to spend more and more time in the Palace, which means inevitably that they are that much more anxious to speak in debates. Therefore, there is less time available, with more hon. Members trying to speak.
I have been fortunate, Mr. Speaker, in catching your eye 15 times—[HON. MEMBERS: "Oh!"]—which I would not admit to if we were not so close to the end of the Session. That has been mainly because I sought to speak in debates on subjects that were not particularly popular. However, on three or four consecutive occasions some of my hon. Friends, having put a lot of work into their speeches, have tried without success to speak in debates on popular subjects in which many hon. Members wanted to speak. That is why I strongly support the motion.
I also support the amendment in the name of my hon. Friend the Member for Stamford and Spalding (Mr. Davies). An allowance for injury time will keep up the spirit of cut and thrust. I also support amendments (a) and (b). Giving you that extra flexibility, Mr. Speaker, in no way forces you to use it; it merely means that you can

extend the rule over a longer period if you choose to do so. I urge the House to support the motion and the three amendments that I have mentioned.

Mr. Nigel Spearing: My hon. Friend the Member for Newham, North-West (Mr. Banks) pointed out that a speech does not often change a vote. However, there are many occasions—this debate is one—when hon. Members just contribute ideas that throw light on issues. Such speeches may not change a vote, but they may change the situation. That is an aspect of debate in this place that is sometimes forgotten. On occasions, we try to persuade. It would be a great pity if we departed too far from the idea of trying to persuade, even if unsuccessfully.
Tonight I shall not oppose the entrenchment of what has hitherto been an experiment. My hon. Friend the Member for Denton and Reddish (Mr. Bennett) was right to say that there may be other ways in which to develop this idea. I shall not oppose the motion, but it is important to ensure that we are not creating a rod for our own backs that may turn out to be longer than we had imagined. It has been said that great benefits will flow, but we know from the table that the Select Committee on Procedure has provided us with—HOC 592 of Session 1985–86—that this rule will be used on the big occasions. When there is an international crisis, for instance, views on the matter have to be ventilated—not arguments made. Hon. Members have said that two or three more hon. Members might have a chance to speak. That may be so, but is that worth the complications that may arise? Some of those complications were outlined well by my hon. Friend the Member for Denton and Reddish, although I do not agree with his conclusions. Television may be one.
When we talk about getting into a debate, we often mean being able to send off a paragraph to show that we said something in the House. That will become a greater temptation with television. We must be absolutely sure that this problem will not become greater.
I understand the purpose of the amendments tabled by my hon. Friend the Member for Newham, North-West, who is a living example of how easy it is for a person of ingenuity and talent to speak in this place. He shows up the false claims of hon. Members on both sides who often say they have no chance to speak. They may not be able to speak on the big occasions, but if they are as assiduous, and develop their parliamentary talents in the same way as my hon. Friend, there are all sorts of ways in which they can contribute—as he has shown. While I will not oppose the amendments, I believe that the House should be very careful, because the claimed benefits will be rather less than people suppose.

Mr. Tam Dalyell: I am uncomfortable for the sort of reason that has been given by my hon. Friend the Member for Newham, South (Mr. Spearing), with whom I shared an amendment that, rightly or wrongly, was not selected.
I concede that, of course, selfishness is intolerable. It was salutary for me within a few months of coming here to be told rather witheringly by that nice man, Mr. Speaker Hylton-Foster, that I would be punished for having


spoken too long and kept someone else out of the debate. Speakers should be able to deliver such punishments, which is partly why we elect Speakers.
The problem is that that could spill over into something else. Like my hon. Friend the Member for Newham, South I cannot vote against the Standing Order as it stands, but what happens if people try to extend it, especially to the Committee Stage of Bills?
I say from the Back Benches, that the trouble does not only come from the Back Benches, but a lot of it comes from the Front Benches. I say quite frankly "Front Benches"—I am not just getting at Ministers. A very close personal friend of mine spoke for far too long on sport yesterday. Consequently, at 1.30 in the morning a number of us were kept out. I make no personal complaint because I had more than my share, but my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley), who really knows about chlorofluorocarbons, was kept out, along with other of my hon. Friends, because of unnecessarily long Front-Bench speeches. The sooner the parties tackle the Front-Bench speeches as well as the Back-Bench speeches, the better it will be for all of us.
I will be forgiven for being personal, but there are examples of occasions when those of us who had a cause—let us not dwell too much on the justice or otherwise of it—have been snuffed out at an early stage. In 1980, by keeping the House up for most of the night, I was successful in changing the policy on retrospective sanctions towards Iran. I am not saying whether it was justified or not, but I do not think that I could have done that under the present arrangements, because a Minister would have made a decision in that case. That is partly why my hon. Friend and I tabled that amendment.
I do not want to provoke unnecessary speeches from Members of the Scottish National party who are keeping a close eye on me, but at 2.15 in the morning one can be candid. The hon. Members know very well that George Cunningham, Enoch Powell and I would have found it very difficult to keep the House going for 47 days on the Scotland and Wales Bills under this dispensation, but it would certainly have been impossible if this had been allowed to spill over. Apart from the merits or demerits, this was a legitimate political act and, if we are changing a political act, we had better be clear about what we are doing.

Mr. Andrew Bennett: Does my hon. Friend accept that in all those examples there was not an end time limit laid down, so, in effect, anyone who wanted to speak could get in? Therefore, there would be no justification for the Chair limiting speeches. The proposals contain nothing that would do that. Those opportunities existed because there was no end time limit. No one is suggesting that it should be brought in in those circumstances.

Mr. Dalyell: My hon. Friend is right. However, he said that no one is suggesting at the moment that speeches in Committee should be limited. I started by saying that if this spills over into Committees, we are in a different ball game.

Sir Peter Emery: The Select Committee on Procedure looked at, and rejected, the concept that this rule could be

extended to Committees. It is important that this should be put on record, because such an extension would be wrong.

Mr. Dalyell: That is accepted. I wish that the hon. Gentleman were right. However, my hon. Friend the Member for Denton and Reddish (Mr. Bennett) is right.
I think of the late 1960s when, from the position in which the hon. Member for Honiton (Sir P. Emery) is sitting, my right hon. Friend the Member for Blaenau Gwent (Mr. Foot), and, behind him, the late Jack Mendelson, used the House of Commons to make long speeches on Vietnam. Others may not agree, but I think that it was those speeches from those Benches that prevented Harold Wilson, who was then Prime Minister, from acceding to Lyndon Johnson's request to send what the President called a "battalion of bagpipers"—his words, not mine—to Vietnam. This was of major political importance, and an action of the House of Commons.
My right hon. Friend the Member for Blaenau Gwent has said that he is against short speeches, and if we had sat at an earlier hour he would have been here. I wish that he could have spoken for himself. He could not have done what he did, which was of crucial international importance, in the major debate to which my hon. Friend the Member for Newham, South referred, unless he had the time to develop the argument.

Mr. Brazier: On an earlier occasion, the hon. Gentleman was courteous enough to finish his speech early to allow in the last hon. Member who wished to speak—that happened to be me. Therefore, I am surprised that he of all people should suggest that the efficacy of a speech should lie in its length. That is an amazing proposition. As we have already heard, the Gettysburg address lasted two rather than three minutes.

Mr. Dalyell: The Vietnam argument was complicated, and if one were to argue on equal terms with Michael Stewart, the then Foreign Secretary, who was an eloquent man, one had to have equal time to do so. It would have been impossible to hold the attention of the House otherwise. In those days, many people came in to hear what Jack Mendelson or a number of others were saying, because the argument was very much among members of the Government party. I do not want to be personal about this and what I say is meant in a flattering way, but I remember occasions when we debated other subjects, and Quintin Hogg, as he was then, could not, in 10 minutes, have made an argument that would sway the House of Commons and alter attitudes on penal affairs and other vital matters. To be eloquent, he had to have at least 25 minutes, and possibly longer.
Is it more important that major speeches should be made by my right hon. Friend the Member for Blaenau Gwent, Quintin Hogg, or whoever, or that three or four extra people should get in at the tail end of a debate to get their names in their local paper? I happen to think that the House of Commons is the place where people should be persuaded. We have to achieve an important balance. Those who are determined enough to get in at all costs should recognise that sometimes, on major occasions, the point of view put forward by an orator is more important than the fact that they are called to speak.
Often it is difficult to compress speeches. I give a current example. It so happens that in this morning's Daily Mail the banner headline is:


Brittan back in favour—Exclusive—Maggie offers top job".
That raises all sorts of questions about the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) becoming a European Commissioner. People such as me might want to make a speech on this. We might want to ask how it is that the great job of European Commissioner should go to a man who in January 1986 for 14 days—[Interruption.] This is an example. For 14 days the right hon. and learned Gentleman supposedly—I repeat, supposedly—misled his senior civil servants, his Cabinet colleagues and his Prime Minister. This may be an unpopular view and I may be told quite nicely by Conservative Members not to do it, but I am afraid that it is an example. When we get to complex, sensitive matters like Westland, we need time to expose the case.
Next week, or some time soon, we shall be discussing the legislation on official secrets. I know that many Conservative Members think that what Clive Ponting did was wrong. I could never have made the case that led to all this if I had not had time. Parliamentary time is necessary to make a serious case. I do not want to draw on the patience of the House, but in a case such as—

Mr. Jacques Arnold: Is not the hon. Gentleman making a case for 10-minute speeches in that he has now spoken for 12 minutes?

Mr. Dalyell: Yes, and I must give way. I leave it like this. If one wanted to make a serious case about the appointment of one of our number as a European Commissioner, one would need more than 10 minutes to do it. On that I will sit down.

Mr. Tim Janman: I intend to be brief, but I want to offer support from this side of the House to the hon. Members for Linlithgow (Mr. Dalyell) and for Newham, South (Mr. Spearing) on the direction in which they have pursued their comments. I came into the debate very sceptical indeed about the motion. I have listened intently to the debate. On reflection, we may have before us a motion which gets the balance right. Certainly I could not support any amendment which sought to increase the area covered by the motion. If we did so, we would be in danger of pursuing a negative, egalitarian policy on how hon. Members speak in the Chamber.
Although I have been a Member for only a short time, it has not taken me long to notice that hon. Members vary enormously in their experience, knowledge and amount of intimate detail which they can bring to bear on a topic. Often if we are talking about a complex matter, I agree with the hon. Members for Linlithgow and for Newham, South that hon. Members who have much experience of a subject can take a considerable time to build a well-structured argument and to portray to the House the cogent case that they wish to present.
In the short time that I have been here and in the debates that I have attended I can think of only one example where I have heard a speech which, if the debate had taken place under the rules which the hon. Member for Newham, North-West (Mr. Banks) would like to see, might have been lost. I agree with the hon. Member for Linlithgow that we do not need to measure subjectively the rights and wrongs of the contribution at hand, but my hon. Friend the Member for Dover (Mr. Shaw), in the debate on the seamen's dispute, could not possibly have made his

speech in 10 minutes, although he might have been able to tailor it down by five minutes or so. However, with his intimate knowledge of the dispute, being the constituency Member, if he had had to work within that constraint, both the argument and the House would have lost out, as he would not have been able to make that 20 or 30-minute contribution to a debate on which he was extremely well qualified to speak.
I do not intend to speak for 10 minutes myself. We may have the balance right on the motion, but I do not think that the proposal should be extended. I support the amendment tabled by my hon. Friend the Member for Stamford and Spalding (M r. Davies) on the intervention issue. Perhaps it is true to say that, if colleagues like myself, who are new to the House, sometimes feel a little put out when more senior Members have an opportunity to speak, then our turn will come. We should not therefore be too impatient, but should be reasonably relaxed about the way in which the House works in that respect.

Mr. Wakeham: I agree with the hon. Member for Linlithgow (Mr. Dalyell) that there are too many long speeches from the Front Benches. In my previous incarnation, I did everything I could to curb them and my right hon. and learned Friend the Patronage Secretary is doing his best now.
I am grateful to everyone who has taken part in the debate. It has been a good debate and I am grateful for the support for the motion, although it has been given with varying degrees of enthusiasm. The House should heed those hon. Members who issued words of caution about going too far and I agree with virtually everything that has been said.
It would not be right to go any further than the Procedure Committee has recommended. It has considered the matter more than once. If hon. Members who have tabled amendments wish to press them, that is their right, but, if they do so, I shall certainly ask the I-louse to reject them. To dissuade them from pressing their amendments, I should say that, if problems occur after a reasonable time, I am sure that it will be possible for the Procedure Committee to reconsider the matter. The fact that the Standing Order was there would not necessarily mean that it was there for ever and a day. I believe that it is the right proposal and that it is right to bring it into the Standing Orders, but, if there are difficulties, we shall face up to them and see what has to be done.

Mr. Dalyell: We should be clear about one point. If my right hon. Friend the Member for Blaenau Gwent (Mr. Foot) were expressing a point of view about the 1960s and Vietnam, could you, Mr. Speaker, make a judgment that my right hon. Friend should be heard further? Would that be within your power, Mr. Speaker?

Mr. Wakeham: Obviously, it is for you, Mr. Speaker, to interpret the Standing Orders, but—if I may express a personal view—it appears clear from my motion that Mr. Speaker may direct a Member who has spoken for 10 minutes to resume his seat forthwith. The fact that the motion states that you, Mr. Speaker, may do so implies that you do not have to do so. Therefore, if you believe that it is right for an hon. Member to exceed the 10 minutes, the wording of my motion would allow you to do so.

Mr. Dalyell: Are we clear, therefore, Mr. Speaker, that you have discretion in the matter?

Mr. Wakeham: We are absolutely clear about that. As it is a matter for Mr. Speaker's discretion, the final judgment on how that is to be exercised is for Mr. Speaker, not me, but my reading of it is that in the circumstances outlined by the hon. Gentleman, Mr. Speaker would have the discretion to allow the right hon. Member for Blaenau Gwent (Mr. Foot) to speak for more than 10 minutes.

Mr. Andrew F. Bennett: Is it the view of the Leader of the House that that discretion should extend to time being added on for interventions? It would help me in deciding whether to push my amendment to a vote to have it clearly on the record whether that is the will of the House. Certainly during the experiment many hon. Members felt that if they gave way they would lose some of the time allocated to them.

Mr. Wakeham: Looking back to the experiment, interventions still occurred and hon. Members managed to make their speeches within 10 minutes. The character of the debate was not severely altered in any way that would deter us from making the arrangement permanent.
My view is that the matter must be left to Mr. Speaker. I believe that he would be acting according to the will of the House if he allowed an hon. Member more time because he had seriously failed to put over his point of view in the 10 minutes or wanted a bit longer because of interventions. I should have thought that that would be perfectly acceptable to the House and I would not wish to quarrel with that.

Mr. Dalyell: Part of the reason why I push this point is that some of us think that it is desperately important that Mr. Speaker should have the power to protect the unpopular view. The difficulty is that the unpopular view often takes some time to explain. As soon as one expresses an unpopular view, be it about Westland or anything else, it needs time. That is why Mr. Speaker must have it in mind that part of his job is, on occasions, to protect the hon. Member who wishes to express an unpopular view.

Mr. Wakeham: We elect Mr. Speaker because we believe that he can exercise judgment and discretion in such matters. The motion allows him to exercise that discretion in the right cases.

Sir Peter Emery: The Procedure Committee understands the argument that has been put forward by the hon. Member for Linlithgow (Mr. Dalyell). That is why, where there is a need for, say, the right hon. Member for Blaenau Gwent (Mr. Foot), to make a long point, Mr. Speaker has a period during which he can call somebody without the ten minutes rule applying. That is why the point made by the hon. Member for Newham, South (Mr. Spearing) is not applicable. The Select Committee has realised that there are times when hon. Members need to make longer speeches. Mr. Speaker can allow such a speech to be made at the appropriate time.

Mr. Wakeham: There is no doubt that the essence of the motion would allow Mr. Speaker discretion.

Mr. Grocott: It is clearly the spirit of the Select Committee's recommendation that interventions enliven debate. It draws attention to that. It is my understanding of the debate that it is a near-unanimous view that, if

interventions were lost, that would be to the detriment of the quality of debate. If that is understood on both sides of the House, I am sure that Mr. Speaker appreciates and understands that all hon. Members hope that the discretion given to him in the proposal will be exercised in favour of allowing interventions.

Mr. Wakeham: Fine. I think that that should have cleared up most of the points that have been worrying people. If anyone is in any doubt, I remind the House that the rule will apply to Privy Councillors and everyone else.

Mr. Spearing: Although I am aware that the hour is late, I must make this point because I cannot make it at another time. Is the Leader of the House aware that we are not simply talking about Mr. Speaker, but about the occupant of the Chair? I did not blame the previous occupant of the Chair at the time of the experiment for using his power of intervention to the second. The motion gives a discretion of "may". The House appears to feel that an intervention should not be made to the second, but that the occupant of the Chair should take account of the end of a sentence or, conceivably, of interventions. That raises difficulties for the occupant of the Chair that we have not discussed, although they are illustrated by some of the points that we have made. Although the feeling of the House is clear, I hope that the Leader of the House will agree that the occupant of the Chair has a little more flexibility than was exercised during the experiment.

Mr. Wakeham: Mr. Speaker will have heard the debate. He must decide how to exercise his discretion. I should think that he would exercise it to the general satisfaction of the House.

Amendment (a) proposed to the Question, in line 2, after `business', insert—
'or at any time after the opening speeches in a debate.'.—[Mr. Tony Banks.]

Question put, That the amendment be made:—

The House divided: Ayes 16, Noes 32.

Division No. 413]
[2.41 am


AYES


Arnold, Jacques (Gravesham)
Michael, Alun


Bennett, A. F. (D'nt'n &amp; R'dish)
Redwood, John


Bennett, Nicholas (Pembroke)
Shephard, Mrs G. (Norfolk SW)


Bowis, John
Stevens, Lewis


Brazier, Julian
Thompson, Patrick (Norwich N)


Cunliffe, Lawrence
Welsh, Andrew (Angus E)


Dalyell, Tam



Ewing, Mrs Margaret (Moray)
Tellers for the Ayes:


Gill, Christopher
Mr. Tony Banks and Mr. John Watts.


Hughes, Robert G. (Harrow W)





NOES


Baldry, Tony
McKay, Allen (Barnsley West)


Boscawen, Hon Robert
Maclean, David


Davies, Q. (Stamf'd &amp; Spald'g)
Neubert, Michael


Dorrell, Stephen
Nicholson, David (Taunton)


Durant, Tony
Ryder, Richard


Emery, Sir Peter
Skinner, Dennis


Foster, Derek
Spearing, Nigel


Garel-Jones, Tristan
Thurnham, Peter


Glyn, Dr Alan
Waddington, Rt Hon David


Grocott, Bruce
Wakeham, Rt Hon John


Hanley, Jeremy
Wallace, James


Harris, David
Waller, Gary


Hogg, Hon Douglas (Gr'th'm)
Widdecombe, Ann


Howarth, Alan (Strat'd-on-A)
Wilshire, David


Hunt, David (Wirral W)



Janman, Tim
Tellers for the Noes:


Lennox-Boyd, Hon Mark
Mr. Peter Lloyd and Mr. Kenneth Carlisle.


Lightbown, David

Question accordingly negatived.

It being more than one and a half hours after the motion was entered upon, MR. SPEAKER proceeded, pursuant to the order of 20 May, to put forthwith the Question on another amendment selected by him.

Amendment (e) proposed to the Question, in line 10, after 'forthwith', insert
'except that in the calculation of this period no account shall be taken of the time taken up by interventions from other Members.'.—[Mr. Quentin Davies.]

Question put forthwith, That the amendment be made:—

The House divided: Ayes 8, Noes 39.

Division No. 414]
[2.52 am


AYES


Arnold, Jacques (Gravesham)
Wallace, James


Davies, Q. (Stamf'd &amp; Spald'g)
Welsh, Andrew (Angus E)


Ewing, Mrs Margaret (Moray)



Janman, Tim
Tellers for the Ayes:


Shephard, Mrs G. (Norfolk SW)
Miss Ann Widdecombe and Mr. Julian Brazier.


Spearing, Nigel





NOES


Baldry, Tony
Lennox-Boyd, Hon Mark


Banks, Tony (Newham NW)
Lloyd, Peter (Fareham)


Bennett, A. F. (D'nt'n &amp; R'dish)
McKay, Allen (Barnsley West)


Bennett, Nicholas (Pembroke)
Maclean, David


Boscawen, Hon Robert
Neubert, Michael


Bowis, John
Nicholson, David (Taunton)


Cunliffe, Lawrence
Redwood, John


Dalyell, Tam
Ryder, Richard


Dorrell, Stephen
Skinner, Dennis


Durant, Tony
Stevens, Lewis


Emery, Sir Peter
Thompson, Patrick (Norwich N)


Foster, Derek
Thurnham, Peter


Garel-Jones, Tristan
Waddington, Rt Hon David


Gill, Christopher
Wakeham, Rt Hon John


Glyn, Dr Alan
Waller, Gary


Grocott, Bruce
Watts, John


Hanley, Jeremy
Wilshire, David


Harris, David



Hogg, Hon Douglas (Gr'th'm)
Tellers for the Noes:


Howarth, Alan (Strat'd-on-A)
Mr. David Lightbown and Mr. Kenneth Carlisle.


Hughes, Robert G. (Harrow W)



Hunt, David (Wirral W)

Question accordingly negatived.

MR. SPEAKER then proceeded, pursuant to the order of 20 May, to put forthwith the main Question.

Question agreed to.

Ordered,
That—
(1) Mr. Speaker may announce at the commencement of public business that, because of the number of Members wishing to speak in a debate on one of the matters specified in paragraph (2) of this Order, he will call Members either between six o'clock and ten minutes before eight o'clock or between seven o'clock and ten minutes before nine o'clock on Monday to Thursday sittings, and between half-past eleven o'clock and one o'clock on Friday sittings, to speak for not more than ten minutes; and whenever Mr. Speaker has made such an announcement he may, between those hours, direct any Member who has spoken for ten minutes in such a debate to resume his seat forthwith.
(2) This Order shall apply to debates on:

(a) the second reading of public bills;
(b) matters selected under paragraph (2) of Standing Order No. 13 (Arrangement of public business) for consideration on allotted Opposition days;
(c) Motions in the name of a Minister of the Crown; and
(d) Motions for an Address in answer to Her Majesty's Speech.

That this Order be a Standing Order of the House.

Mentally Disordered Prisoners

Motion made and Question proposed, That this House do now adjourn.—[Mr. Alan Howarth.]

Mrs. Gillian Shephard: I am grateful for the opportunity to raise this matter, even at such an unsocial hour. My hon. Friend the Minister will recall the debate on prisons on 12 May. He will also recall that, although that debate was wide-ranging, the question of mentally disordered offenders in our prisons was not raised, although from time to time it appears in parliamentary questions, and two years ago it was raised in an Adjournment debate.
This morning I shall not explore the inadequacy of our prison system to deal with the mentally disordered offender—although that is riot in dispute—nor do I wish to complain about the lack of alternatives for such people. Rather I wish to ask how it is, given the legal framework provided by the Mental Health Act 1983, that any offenders with a mental disorder as defined under the Act are in our prisons.
The Government are to be congratulated on their ambitious building and refurbishing programme for prisons. There has been a 117 per cent. increase in capital expenditure on prisons since 1979. By the mid-1990s we shall have 26 new prisons. At the prison in my constituency at Wayland near Watton, which is a new prison, the work being done demonstrates what a difference it can make to prisoners and staff to work in up-to-date surroundings.
It is true that our prison population is among the highest in developed countries. However, the Government have been energetic in pursuing alternatives to custody while balancing those with the proper public concern about safety and security in the light of increasing numbers of crimes of violence.
Despite those achievements, the prison service is under strain. The conditions in which some prisoners have to live are unacceptable by any standards and our prisons are peculiarly illequipped to deal with mentally disordered offenders. What is more, they and the staff could do without the additional problems created by the presence of such offenders. Therefore, it is all the more curious that there should have been as many as 315 mentally disordered offenders, as defined by the Mental Health Act 1983, in our prisons on the last date of counting, which was 30 September 1986, when a perfectly satisfactory legal framework exists to prevent their admission in the first place.
Apart from the additional strain imposed on the prison service by the presence of those offenders, conditions in prisons are not likely to help their illness. The Select Committee on Social Services found in 1986 that prison medical officers prepared for the courts in 15 months more than 9,000 psychiatric reports, compared with 219 physical health reports on people remanded in custody for medical assessment. Only 40 per cent. of prison medical officers have a qualification in psychiatry. Therefore, some psychiatric reports are prepared by people who are not psychiatrists. It is clearly of the utmost importance that court reports should be capable of giving good professional advice on whether a person should be sent to prison or dealt with through the hospital or probation systems.
There are far more mentally disordered people in our prisons than those defined as treatable under the Mental Health Act. The report of the Select Committee on Social Services suggested that there could be as many as 1,500 male prisoners suffering from a mental disorder. That figure does not necessarily include those who become disordered after admission.
The treatment available to those offenders is restricted by the prison environment and by the availability of appropriately trained staff. There are considerable problems surrounding the issues of consent to treatment. Prisoners remanded to hospital under section 36 of the Mental Health Act are subject to the consent to treatment provisions contained in section 58. Prisoners in prison are not, with the result that those who administer medication have to rely on the common law for their justification and the prisoner has no rights at all. There can be no doubt that prison medical officers are under pressure to tranquillise a difficult patient, even without his consent, when the alternative is a prison for the disturbed. That is fair on neither the doctor nor prisoner.
If conditions in prisons are so unsatisfactory for those suffering from a mental disorder and if their presence places an additional strain on a system which, for the moment, is somewhat overburdened, why are they admitted in the first place? Some would suggest a lack of alternative placements but I would not. Thirteen of the 14 regional health authorities have permanent regional secure units. The remaining region, South West Thames, proposes RSU provision which is to function in association with several "close supervision" units already operating in existing hospitals.
Although this is primarily a matter for the Department of Health and Social Security it obviously impinges on the prison service and the offenders to whom I am referring. The use to which the RSUs are put, the admission criteria and the local co-operation and co-ordination between all the relevant agencies, particularly the consultant psychiatrist responsible for the RSU, are more important than the number of places available. However, that too is being watched by the DHSS, which is awaiting the results of a research study on the eventual national need for such secure accommodation.
In Norfolk, we have the East Anglian regional secure unit based at Thorpe St. Andrew near Norwich. It has 36 beds but, interestingly enough, for the first 18 months or so of the unit's existence, only 16 of them were occupied. Not only was that clearly very wasteful of the overall investment, it did not allow the unit to function as intended.
Fortunately, the regional health authority medical officer was able to ensure that occupancy rates became more realistic, and the unit is at last performing the task for which it was built at huge expense. However, what happened in Norfolk may well be replicated elsewhere in the country.
I would not agree with those who argue that special hospitals need more finance. There has been considerable investment in such hospitals in recent years, not least at Broadmoor, where a completely new building is being provided right now. More important than providing yet more money for special hospitals is the minimising of

delays for those awaiting transfer from prison, and that means speeding up the provision of reports and other admission procedures.
Given that our prisons are already under strain—for the moment anyway—and are not equipped with either the buildings or the staff to deal with mentally disordered offenders—and if alternative provision exists outside—why are 315 mentally disordered people, as defined under the Act, in the prison system? I suggest that it is because, despite the legal framework that exists to prevent it, there is still an imperfect understanding on the part of the courts of the alternatives available to them, and an imperfect relationship at local level between the judiciary, the penal system and the Health Service which, if it were used properly, could ensure a better use of facilities and a better disposal for the individual. Unfortunately for the moment, that arrangement does not function correctly.
The second biennial report of the Mental Health Act Commission, published last autumn, makes some interesting points. The commission set itself the task of collecting basic data that would give a broad indication of the level of achievement in practice of sections 35 to 38 of the 1983 Act, which provided that offenders who were thought to be, or had been judged to be, mentally disordered should not be held in prison. The commission was particularly interested in the extent of the use of section 35, which gives the power for remand to hospital for report to be used when remand on bail is felt to be inappropriate.
Two projects were set up. One in a Crown court division fell by the wayside because of the small number of returns made. The other was conducted with all the 314 magistrates' courts in England and Wales. Its aim was to chart the progress of defendants remanded for psychiatric reports from remand to final disposal over a three-month period. Returns were made on 241 cases. In 41 of those cases, despite the fact that the offenders could have been remanded to hospital for psychiatric reports, they were remanded in custody. Twelve per cent. were remanded to hospital as a condition of bail and only 11 per cent. were remanded to hospital under section 35; 36 per cent. got unconditional bail.
Given the high hopes attached to that part of the Act when it came into force, those figures are disappointing by anyone's standards. They may be explained by a variety of factors. Lack of familiarity with the provisions of the Act on the part of the courts looms large among them. Another is reluctance on the part of doctors to accept remands under section 35, possibly because such patients are also subject to common law principles on consent for treatment.
What happened to the 99—the 41 per cent.—who were first remanded in custody? Of those, 32 received hospital orders under section 37; two received interim hospital orders under section 38; 17 were imprisoned; and 48 received non-custodial sentences. The point about those figures is that during that period our prison service was burdened with a further 99 offenders all of whom might have been remanded to hospital under section 35 for report, and of whom a third ended up in hospital in any case, and half got non-custodial sentences. Of the 26 who were remanded under section 35, 15 got hospital orders under section 37 and nine got non-custodial sentences, which suggests that in their cases the use of section 35 was the right disposal.
I know that there has been a joint Home Office-DHSS working group, which reported last autumn to Ministers on some of these questions, and that the Government accepted all the 16 recommendations. I would particularly welcome information from my hon. Friend the Minister about the exact ways in which at local level, both magistrates and Crown courts and their officials are being made aware of their powers under sections 35 to 38 of the Act, and what effect this has had in the past six months on reducing the number of mentally disordered offenders in our prisons.
I should be grateful for any information on progress to encourage co-operation between judicial, penal and health services at local level, and the kind of information now required by courts about the availability of beds and so on. My hon. Friend will be familiar with the recommendation of the commission that more consideration be given to sections 35 and 36 with a view to giving a single power for both reports and treatment.
Our prisons have problems. Given that the Government are making such vigorous efforts to overcome them and that the 1983 Act is Government legislation, it is the Government's responsibility to ensure that the success of the one programme is not jeopardised by less than satisfactory functioning at local level of the other.

Mr. Patrick Thompson: I am grateful to my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard) for allowing me to intervene briefly. I wholeheartedly support her arguments. Clearly, prison is not the right place for many categories of mentally ill offenders, particularly schizophrenics.
My hon. Friend referred to the East Anglian regional secure unit, which is in my constituency. I have experience of, and have had talks about, what happens in Norwich prison. Many problems there serve only to underline what my hon. Friend has said. Recently, we have had suicides in prisons in the United Kingdom which also serve to underline the seriousness of this issue. I welcome the Home Office guidelines which were detailed in a written reply to me some months ago.
I should like briefly to draw attention to the work of the National Schizophrenia Fellowship both nationally and in Norwich in supporting families and campaigning on these issues. My hon. Friend referred to sections 35 to 39 of the Mental Health Act 1983. We may have to go further than she has suggested and amend the legislation so that health authorities cannot escape their obligations so easily and so that mentally ill patients are kept out of our often overcrowded prisons.
The continuing closure of our large mental hospitals is undoubtedly exacerbating this problem. I hope that my hon. Friend the Minister will talk urgently with colleagues in the DHSS about that matter and the other points that we have raised.

The Parliamentary Under-Secretary of State for the Home Department (Mr. Douglas Hogg): I am very grateful to my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard) for giving the House this opportunity to discuss the treatment of the mentally disturbed individuals who come before the courts. If I may say so, she has

reviewed the problems with considerable clarity and is right to stress that the prison environment is not an appropriate place for keeping mentally disordered people. I suspect that her analysis of the reasons why there are in the prison system as convicted persons a number of mentally disordered people is, broadly speaking, correct.
There is no doubt that this is an important issue which causes the Government considerable anxiety. The House will be aware that my right hon. Friends the Home Secretary and the Secretary of State for Social Services set up in 1986 an interdepartmental working group on mentally disturbed offenders. It reported last year, and all its substantial recommendations were accepted by the Government. I am glad to say that good headway is being made with implementation of those recommendations.
My hon. Friend has asked me a number of specific questions. At the moment I am not in a position to answer them in the detail that she would like. For some time past I have been concerned with this issue. I am now trying to draw up for my own purposes a schedule of the sort of issues that the Home Office and the DHSS need to address, with a view to determining how we can reduce the number of mentally disordered people in the prison service. When I have had a chance to review the options I shall be in a better position to answer the sort of questions that my hon. Friend has asked tonight. I hope she will forgive me for saying that I find it difficult at this stage to give the sort of conclusive view that she wants. She has anticipated my deliberations by some weeks.
It is important to recognise that there is no single category of mentally disordered offenders. There is a complex group of people with differing medical conditions and varying needs for treatment, care and control. We must also recognise that psychiatric medicine is going through a period of fundamental change. Professional attitudes towards the way in which patients should be treated have changed profoundly. Change on this scale is bound to cause strains and dislocation.
An important distinction has to be made between people whose mental disorder falls within the scope of the Mental Health Act 1983 and who consequently may be detained in hospital for treatment, and those who, while they are mentally disordered. do not suffer to a degree that warrants their detention in hospital. These are separate groups, and we need to examine their problems individually.
People whose mental disorder brings them within the scope of the Mental Health Act can be dealt with in a variety of ways. Section 136 authorises the police to take them to hospital for assessment if they are found in a public place and appear to be in need of care or control. That applies whether or not they have committed an offence, and is a useful way of enabling the police to divert minor offenders from the courts.
I suspect that the police do not make sufficient use of this power. I also suspect that too often people are brought before the courts for relatively minor offences when they could be dealt with under the section to which I have referred. I should like the police to consider using that section more frequently.
When the police and the Crown prosecution service believe it is in the public interest to proceed with a prosecution, the courts have a number of powers available to them. Courts wishing to obtain psychiatric reports on defendants do not, of course, have to rely on the provisions of the Mental Health Act as an alternative to


remanding them in custody. In some instances, it may be possible to adjourn and ask a social worker or the police to take the defendant to a hospital. In others, it may be possible to grant him bail either on the understanding that he will seek medical treatment or on condition that he resides in hospital for such treatment.
Section 35 of the 1983 Act is also available to magistrates and Crown courts which want reports on the accused's mental condition. This requires the written or oral evidence of a medical practitioner that there is reason to suspect that the defendant is suffering from one of the four categories of mental disorder specified by the Act. The remand may be for 28 days at a time, with a maximum of 12 weeks.
Section 36 of the 1983 Act enables Crown courts to remand an accused person to hospital for treatment on the written or oral evidence of medical practitioners that he is suffering from mental illness or severe mental impairment of a nature or degree which makes it appropriate for him to be detained in hospital. The remand may again be for a period of 28 days at a time with a maximum of 12 weeks.
When a defendant who comes within the scope of the Mental Health Act has been convicted of an imprisonable offence, Crown courts and magistrates courts can make a hospital order under section 37 of the Act. Before doing so, they must have written or oral evidence from two medical practitioners that the offender is suffering from one of the four categories of disorder of a nature or degree that makes it appropriate for him to be detained in hospital for medical treatment.
My hon. Friend has emphasised the number of people who are in prison and who, in the view of the prison medical service, are such that they should be detained in hospital for treatment, and she has stated the numbers correctly. The last census in September 1987 showed that 188 remand prisoners and 156 sentenced prisoners fell into that category. The distinction must be made between remand and sentenced prisoners for these purposes. The remand prisoners are generally those who are awaiting assessment by doctors from the special hospitals or from the NHS to arrange for their admission if courts make hospital orders following conviction. I would like to see greater use made by the courts of arrangements such as remands direct to hospital, or of informal arrangements with local hospitals so as to reduce the number of people remanded to prison.
It is inevitable that there will be in prison on remand at any time a number of people who are mentally disordered within the meaning of the Act, and who are susceptible to treatment in hospital, but who, because of the court's

order, have to be in prison or on remand pending assessment. I do not find that quite as troubling as the number of sentenced prisoners in prisons.
We must accept that in some cases, especially the more serious ones, remand to prisons, at least initially, cannot be avoided. The prison medical service provides an essential service in liaising with the special hospitals and the NHS to make arrangements for admissions to hospitals either on transfer under section 48 of the Mental Health Act or after conviction.
I hope that the House accepts that the problem of mentally disordered offenders is one which the Government take very seriously. There has been a steady improvement in the facilities available in the special hospitals and in the NHS for people who can be detained in hospital for treatment. The 1983 Act introduced a number of measures designed to avoid the use of custody for mentally disordered people, including the power to remand for reports and treatment under sections 35 and 36 of the Act. It also enables the courts to make guardianship orders or to make interim hospital orders to enable a person's response to treatment to be assessed before the courts make a final decision. The Act has therefore given the courts a great deal of help towards enabling them to get mentally disturbed offenders into hospital care instead of into prison.
We recognise that much more needs to be done and this led us to set up in 1986 the interdepartmental working group, which involved work between the Home Office and the DHSS and, as I have already stated, the Government have accepted the great majority of the substantial recommendations, which we are now putting in place.
My hon. Friend has raised a very serious point, because there are a number—not a huge number—of mentally disordered people in the prison system. Many people suffer from mental handicap of a different kind, but that is a different problem. We are talking about mentally disordered people within the meaning of the Act, and there are too many of those.
The presence of the remand prisoners is probably inevitable, and I am troubled rather more by the presence of the sentenced prisoners. We must identify where it is that either the substantive law or the way that we implement the law is failing to prevent the entry into the prison system of such people. I propose to try with officials and, if necessary, with Ministers to identify such points and discover if there are a range of measures that we could introduce that would reduce the number of such persons in prison. As my hon. Friend has made her interest clear, I will do my utmost to involve her in the work that I should like to see carried forward.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Three o'clock.